Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

DEATH OF A MEMBER

Mr. Speaker: I regret to have to inform the House of the death of Robert Fisher Crouch, Esq., Member for North Dorset, and I desire on behalf of the House to express our sense of the loss we have sustained and our sympathy with the relatives of the honourable Member.

PRIVATE BUSINESS

DARTFORD TUNNEL BILL

Read the Third time and passed.

PETITION

Rent Bill

Captain Hewitson: I have been requested by the citizens of Hull to seek your permission, Mr. Speaker, to present a Petition against the Rent Bill. They claim that, with 86,715 houses damaged and only 6,000 untouched during the bombing in the war, they are suffering from a very severe shortage of housing accommodation in their area. If the Bill becomes operative, many of them, having lost security of tenure, will have to pay very high uncontrolled rents because no alternative accommodation will be available, but the vast majority of them, whilst retaining security of tenure, will have to pay severe increases in rents with no guarantee that their places will be maintained in an adequate and proper state of repair.
They ask, therefore, that, if the Bill cannot be amended to deal with these injustices, it should be abandoned altogether. They conclude by saying, as they are entitled:
And your Petitioners, as in duty bound, will ever pray.

To lie upon the Table.

Oral Answers to Questions — LOCAL GOVERNMENT

New Towns (Green Belts)

Mr. Remnant: asked the Minister of Housing and Local Government under what circumstances building is permitted in green belts round new towns.

The Minister of Housing and Local Government and Minister for Welsh Affairs (Mr. Henry Brooke): New building in areas which it is agreed should be defined as green belts is being confined to building for agricultural purposes or other uses appropriate to a rural area, apart from a strictly limited amount of "infilling" or "rounding off". There is no difference for this purpose between a green belt round a new town and one round an old town. I am sending my hon. Friend a copy of a circular on this subject which was sent to local planning authorities by my predecessor.

Mr. Remnant: As a result of that Answer, can my right hon. Friend give an assurance that there will be no difference in treatment between a local authority and a development corporation?

Mr. Brooke: The local authority is the planning authority, but if there is an appeal made to me I take everything into account and try to give proper weight to all the evidence that is before me and all the knowledge that is available. There is certainly no discrimination in favour of development corporations of new towns.

Clean Air Council (Membership)

Mr. Moyle: asked the Minister of Housing and Local Government if he is now in a position to announce the names of those members he has appointed to the Clean Air Council as provided for by the Clean Air Act, 1956.

Mr. H. Brooke: The constitution of the Clean Air Council is set out in an Order which I have laid before Parliament today. The Order provides that the Parliamentary Secretary to the Ministry of Housing and Local Government and the Parliamentary Secretary to the Ministry of Power are to be the Vice-Chairmen of the Council. I am circulating


in the OFFICIAL REPORT the names of those who have accepted invitations to serve as members of the Council, and whom I now propose to appoint.

Mr. Moyle: Is the Minister aware that the reply he has just given will give general satisfaction throughout the country?

Mr. Brooke: I am very grateful to the hon. Member.

Following are the names:

R. C. E. Austin, Esq., LL.M., Town Clerk, St. Pancras.

Mrs. A. L. Barker, J.P., Alderman, City of Stoke-on-Trent.

Sir Hugh Beaver, K.B.E., M.Inst.C.E., M.Inst.Chem.E., Chairman, Arthur Guinness and Co. Ltd.

C. A. Bence, Esq., M.R.C.S.. L.R.C.P., O.St.J., Alderman, City of Cardiff.

W. T. Bowen, Esq., J.P., Alderman, City of Birmingham.

J. A. Brown, Esq., J.P., Councillor, County Borough of Middlesbrough.

Commander C. Buist, M.V.O., R.N.(Retd.). Chairman, Low Temperature Coal Distillers Association of Great Britain, Ltd. Vice-President, National Union of Manufacturers.

Mrs. D. M. Charlton, B.Sc., Chairman. The Women's Advisory Council on Solid Fuel.

Sir John Charrington, Chairman. National Federation of Coke Distributors Associations, and of the Chamber of Coal Traders.

J. A. Connel, Esq., Director and Head of Technical Division, Unilever Ltd.

P. B. Dingle, Esq., C.B.E., LL.M., Town Clerk, Manchester.

Sir Josiah Eccles, C.B.E., M.M., B.Sc., M.Inst.C.E., M.I.E.E., M.I.Mech.E., Deputy Chairman, Central Electricity Authority.

C. S. Garland, Esq., A.R.C.S., B.Sc, F.R.I.C., M.I.Chem.E., President, National Union of Manufacturers.

Lieut.-Col. The Lord Dudley Gordon, D.S.O., M.I.Mech.E., Member of Council and Executive Committee, British Iron and Steel Federation.

R. W. Husband. Esq., A.M.I.H.V.E., Controller of Engineering Department, Beecham Group, Ltd.

H. W. H. Icough. Esq., Alderman, Metropolitan Borough of Greenwich, Chairman of the General Purposes Sub-Committee, Metropolitan Boroughs Standing Joint Committee.

Sir Henry Jones. M.B.E., M.Inst.Gas E., M.I.C.E., M.I.Chem.E., Deputy Chairman, Gas Council.

J. Latham, Esq., C.B.E., Deputy Chairman, National Coal Board.

Dr. W. A. Macfarlane, Ph.D., B.A.. B.Sc, F.Inst.F., Chief Executive of the National Industrial Fuel Efficiency Service.

R. S. MacTier, Esq., Chairman of Technical Committee, Liverpool Steam Ship Owners' Association.

F. V. Magness, Esq., J.P., Vice-Chairman, Willenhall Urban District Council.

Dr. LI. Roberts, M.D., M.R.C.P., D.P.H., Medical Officer of Health. City of Sheffield.

Dr. S. W. Saunders, Ph.D., B.Sc, F.R.I.C, Managing Director. Billingham Division of I.C.I. Ltd.

Professor A. B. Semple, V.R.D., M.D., D.P.H., Medical Officer of Health, City of Liverpool.

Jack Tanner, Esq.. C.B.E., Past President of T.U.C. General Council.

Professor M. W. Thring, M.A., F.Inst.P., F.Inst.F., M.I.Chem.E., Professor of Fuel Technology and Chemical Engineering, University of Sheffield.

C. M. Vignoles. Esq., O.B.E.. General Manager. Shell-Mex and B.P. Ltd.

J. W. Watkins, Esq., C.V.O., D.S.O., M.C., Member of the British Transport Commission, and

A. H. Wilson, Esq., F.R.S., Managing Director in charge of Research and Development, Courtaulds, Ltd., Member of the Fuel Research Board of the Department of Scientific and Industrial Research.

Planning Appeals

Mr. John Hall: asked the Minister of Housing and Local Government to what extent his decisions in planning appeals are based on the evidence given at the inquiries; and what other considerations are taken into account.

Mr. H. Brooke: In determining a planning appeal, I am under an obligation to have regard to the provisions of the development plan for the area and to any other material considerations. The evidence given at the inquiry will normally constitute the most important of these considerations; and the extent to which other considerations may have to be taken into account will vary according to the circumstances of the particular case. It is the practice to set out in the letter announcing my decision not only a summary of the evidence given at the inquiry but also the reasons for the decision.

Mr. Hall: Is my right hon. Friend aware that there are times when it would appear that the Minister's decision has gone against the weight of the evidence given at the inquiry? Is it possible for him to make it quite clear to an appellant that there may be other circumstances, which may not have been referred to in the inquiry, which guide the decision on these matters?

Mr. Brooke: I hope that the Answer I have given, which is a carefully considered Answer, will set out as clearly as it is possible to set it out the manner in which the Minister has to reach his decisions on appeal cases.

Mr. Lindgren: As the other considerations referred to by the hon. Member for Wycombe (Mr. John Hall) are often representations made by other Government Departments, would it not be better that the Government Departments gave evidence before the inquiry in the same way as anyone else gives evidence?

Mr. Brooke: That is one of the matters on which the Franks Committee has received evidence, and we shall give careful consideration to that Committee's Report when it is available.

Mr. Fletcher-Cooke: What is the objection to the proposal put forward by the hon. Member for Wellingborough (Mr. Lindgren)? Why is it that my right hon. Friend's expert witnesses, giving evidence before the Franks Committee, have resisted this suggestion so strongly?

Mr. Brooke: It is not customary for representatives of Government Departments to give evidence in contradiction to one another. The evidence given on behalf of my Department to the Franks Committee was. I think, very cogent.

Oral Answers to Questions — HOUSING

Requisitioned Properties, London

Mr. Lipton: asked the Minister of Housing and Local Government how many dwelling-houses are still requisitioned by Metropolitan borough councils; and when he now expects them to be de-requisitioned.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. J. R. Bevins): 16,735 houses were held under requisition by Metropolitan borough councils on 31st March, 1957, which is the latest date for which figures are available. My right hon. Friend cannot forecast the rate at which the councils will be able to release these houses between now and 31st March, 1960, when their right to possession is due to come to an end.

Mr. Lipton: Is the hon. Member aware that, with the virtual stopping of new housing in London other than for slum clearance, and with more people pouring into London from everywhere, it will be quite impossible by 1960 to provide other accommodation for people occupying all these requisitioned dwellings, of which there are 2,200 in the Metropolitan Borough of Lambeth? Where are these people to go? Is the Minister not aware that the housing problem in London is getting worse?

Mr. Bevins: My right hon. Friend is aware of all the difficulties, but there has been a distinct improvement in the situation in London in the last two years. A circular has recently been issued inviting local authorities again to ask owners to accept as statutory tenants those who are at present licensees. We are perfectly satisfied with the way in which this is moving.

Mr. Gibson: In view of the fact that there is still a terrific housing problem in London, and in view of the difficulty which local authorities in the area are experiencing in providing housing for any of the people on their waiting lists, will the Government consider postponing the date in 1960 when requisitioning as such is to cease? If there are anything like the number of houses then requisitioned as there are now, the financial and other problems of all the local authorities will be almost back-breaking.

Mr. Bevins: My right hon. Friend recognises those difficulties, but during the last two years there has been a drop of about 40 per cent, in the houses held on requisition in London. Those local authorities which foresee difficulties in solving this problem by 1960 have been invited to put to my right hon. Friend a phased programme either for the purchase or for the leasing of the residue of these houses.

Mr. Mitchison: Is the Minister satisfied with the response by landlords to the invitation which is being sent to them to accept these temporary tenants as statutory tenants? Has he available, and will he give it if asked, particulars of what has happened in reply to that invitation in different Metropolitan boroughs?

Mr. Bevins: That is a slightly different question. I assure the hon. and learned


Gentleman that, on the whole, the response in the Metropolitan boroughs to the first invitations has been very good.

Mr. Lipton: No.

Mr. Bevins: There was a drop of about 40 per cent, following the first invitations to owners, and my right hon. Friend is hopeful that there will be an even greater response having regard to the provisions of the Rent Bill.

Small Dwellings (Acquisition)

Mr. Parkin: asked the Minister of Housing and Local Government if he will publish in the OFFICIAL REPORT a table showing the number of houses purchased under the provisions of the Small Dwellings Acquisition Act in each of the London boroughs during each year since 1949.

Mr. H. Brooke: Separate figures for each London borough are not readily

ADVANCES BY LOCAL AUTHORITIES UNDER THE SMALL DWELLINGS ACQUISITION ACTS AND THE HOUSING ACTS




April, 1945 to March, 1951
April, 1951 to March, 1952
April, 1952 to March, 1953
April, 1953 to March, 1954
April, 1954 to March. 1955
April, 1955 to March, 1956




Number of dwellings
Number of dwellings
Number of dwellings
Number of dwellings
Number of dwellings
Number of dwellings


Advances under the Small Dwellings Acquisition Acts:









(i) for acquisition
…
450
117
103
117
128
109


(ii) for construction
…
2
11
1
3
—
4


Advances under Housing Act, 1949 (Section 4):









(i) for acquisition
…
214
588
697
787
1,048
1,305


(ii) for construction
…
11
14
22
56
45
69

Mr. Parkin: asked the Minister of Housing and Local Government whether he is satisfied with the use being made of the provisions of the Small Dwellings Acquisition Act; and whether he will give the total numbers of houses acquired under this Act in each of the last five years.

Mr. H. Brooke: I am never satisfied, but increasing use has been made of these

available. I am circulating in the OFFICIAL REPORT the figures which I have for all the Metropolitan boroughs together.

Mr. Parkin: Would the Minister think it worth while for his own information to try to get these figures? I suspect that there will be some startling variations between one borough and another. Would he not agree that it would be worth while to give encouragement for the fullest use of this device by which, if it is used with energy and discretion, a good deal of the unfortunate speculation in the fag-ends of leases may be avoided?

Mr. Brooke: I am very anxious indeed for these powers to be used. I am sorry that I was unable to give the full information today, but it needs a considerable amount of collection and the hon. Member did not give me very long notice of the Question.

provisions in each year since the end of the war. The information desired is published for the four years 1951–1955 in Appendix I to the Ministry's Annual Report for 1955; and the figures for 1955–56 will be published in the Report for 1956. I am circulating the information for all five years in the OFFICIAL REPORT.

ADVANCES BY LOCAL AUTHORITIES UNDER THE SMALL DWELLINGS ACQUISITION ACTS AND THE HOUSING ACTS




April, 1951 to March, 1952
April, 1952 to March, 1953
April, 1953 to March, 1954
April, 1954 to March. 1955
April, 1955 to March, 1956




Number of dwellings
Number of dwellings
Number of dwellings
Number of dwellings
Number of dwellings


Advances made under the Small Dwellings Acquisition Acts:








(i) for acquisition
…
12,335
8,670
10,337
15,431
17,587


(ii) for construction
…
4,025
4,758
6,352
8,017
7,559


Advances, under Housing Act, 1949 (Section 4):








(i) for acquisition
…
3,614
3,337
4,685
10,854
20,187


(ii) for construction
…
1,235
1,562
2,531
4,257
7,849

Mr. Parkin: asked the Minister of Housing and Local Government if he will sponsor and organise a tap issue of housing bonds which could be sold and serviced by local housing authorities who would retain the capital for housing development additional to that permitted by their present resources, including an arrangement by which these bonds could be redeemed at par to provide the deposit for the purchase of a house through the local authority under the provisions of the Small Dwellings Acquisition Act.

Mr. H. Brooke: Local authorities already have wide powers for borrowing; and I do not think that the special features proposed here are necessary.

Mr. Parkin: Will the Minister perhaps reflect on this, because the idea behind it is that this would make a form of extra saving and, if well advertised, could be at least as attractive as Premium Bonds to people who want to give wedding presents or who are saving up for a deposit? A general loan is not very attractive compared with the extra attraction of one specific objective— namely, the improvement in housing in one's own borough.

Mr. Brooke: I understand that argument, but I am not sure whether it would be right to give borrowing for housing purposes a superiority in publicity over raising capital for, say, school building. Moreover, the hon. Member suggests a kind of national loan, whereas the general policy nowadays is to throw the responsibility for borrowing on the particular local authority, and I think that is sound.

Rents

Mr. Sorensen: asked the Minister of Housing and Local Government the aver age rent now being charged on five-room housing and flats, respectively, in respect of municipal houses whose construction was completed this year in outer London areas; and how this compares with the rentals charged for similar dwellings completed in 1950 and 1955.

Mr. H. Brooke: I regret that I have not got this particular information.

Mr. Sorensen: Will the Minister try to get this information, which would be extremely illuminating? Will he not try to find out exactly the answer to my Question, which surely is a legitimate Question?

Mr. Brooke: I have a certain amount of information, but I think perhaps the best thing would be for me to write to the hon. Member and send him the information which I have. [HON. MEMBERS: "No."] I regret to say that the particular information which he requests here is not at this moment available, and I therefore could not publish it.

Oral Answers to Questions — EMPLOYMENT

Labour Attaches

Mr. Lee: asked the Minister of Labour whether he will state the number of labour attaches in post; how this figure compares with the largest number at any period; and what plans he has for ex tending the service.

The Minister of Labour and National Service (Mr. Iain Macleod): There are at present nineteen labour attaché posts, but one is shortly to be withdrawn as an economy measure. This compares with a maximum in 1952 of twenty-three labour attaché posts and, in addition, a post of Labour Adviser to the United Kingdom High Commissioner in Germany. The possibility of further appointments will be kept in mind for consideration when financial conditions permit.

Mr. Lee: Would not the right hon. Gentleman agree that this development has been one of enormous importance in two-way information between this country and others to which we have assigned these people and that their work is of outstanding importance? Is it not regrettable that he should now announce that, instead of an extension of such an important service, we are even thinking of reducing it? Would he reconsider that?

Mr. Macleod: I attach the greatest importance to the service. The one post which is being withdrawn is from a place where at the moment it is impossible for it to function effectively. I said in the latter part of my Answer that I will keep in mind the possibility of further appointments when financial conditions permit.

Mr. Woodburn: Is the Minister aware that labour attaches perform a function not easily performed by any other member of the embassy, that they have acquired, in most countries, a prestige which is of great benefit to the country, and that it is really no economy to withdraw them where they can be usefully employed?

Mr. Macleod: Yes, Sir. As I said, the one being withdrawn—[HON. MEMBERS: "Where?"]—in Athens—is being withdrawn because he cannot be effectually employed there at the present time.

Fire-Fighting Equipment

Mr. Lee: asked the Minister of Labour whether he will make a statement as to the progress made by appropriate firms in the installation of fire-fighting equipment.

The Parliamentary Secretary to the Ministry of Labour and National Service (Mr. Robert Carr): Certain Regulations made under the Factories Acts dealing with processes involving high risk of fire require the provision of fire extinguishing

equipment. I have no reason to think that firms subject to these Regulations fail to comply with these requirements. The question of extending the requirement to provide fire-fighting equipment to other cases is under consideration.

Mr. Lee: The hon. Gentleman will remember that at the time of the Keighley fire quite a number of quite shocking revelations were made about the way in which the Factory Acts were being evaded in this respect. It was rather to that point that I was addressing my Question. Can he say whether any progress has been made since then in the review which the Ministry promised to undertake and which the factory inspectors, I understood, were carrying out?

Mr. Carr: A good deal of progress has been made, as I have said in reply to Questions on a number of previous occasions. I do not think that the failures to which the hon. Gentleman refers come into this particular category. As far as we are aware, there is no reason to believe that the obligation to have fire-fighting appliances is being neglected.

Recruitment of Mine Workers (Borough Exchange)

Mr. Isaacs: asked the Minister of Labour what result has been obtained by the Borough Employment Exchange in its efforts to recruit workers for the coal mines.

Mr. Iain Macleod: Since the beginning of the year, the Borough Employment Exchange have submitted forty-six men for work in coalmining, of whom thirteen have been accepted.

Mr. Isaacs: In view of the locality in which the Borough Employment Exchange is situated, and in view of the results obtained, would not the Minister consider that the staff there are entitled to better accommodation? Secondly, is he able to say how many of these workers have been recruited in the Borough of Westminster?

Mr. Macleod: I cannot answer the second part of the right hon. Gentleman's Question without notice, but I should be very glad to go into the figures. It is true that this is a very good result, and I believe that the National Coal Board has written especially to the manager of the local exchange to congratulate him.

Stoke-on-Trent

Dr. Stress: asked the Minister of Labour how many vacancies for men and women have been recently notified to the employment exchanges in Stoke-on-Trent; and how the figures compare with those of twelve months ago.

Mr. Iain Macleod: The numbers of vacancies notified to employment exchanges in Stoke-on-Trent and remaining unfilled on 10th April, 1957, were 581 for males and 974 for females. Corresponding figures for 4th April, 1956, were 1,679 and 1,814, respectively.

Dr. Stross: Does not that Answer make it apparent that there has been some worsening in the general labour situation in this city in this last year, and, apart from the obvious treatment, namely, the complete abolition of Purchase Tax, has the right hon. Gentleman any advice to give?

Mr. Macleod: Of course, there is a difference here, as in most parts of the country, between last year's very high level and the slackening which has taken place this year, but there has been in the last month or so in Stoke-on-Trent and other places a considerable upswing —and a very welcome one—in the number of vacancies. Obviously, I cannot comment on the Purchase Tax question, but some relief must surely have been given in the Budget in relation to Purchase Tax on household goods.

Dr. Stross: asked the Minister of Labour to state the figures for part-time and full-time unemployment in Stoke-on- Trent at the last convenient date as compared with the same date in 1956.

Mr. Iain Macleod: On 15th April, there were 2,172 registered as wholly unemployed and 580 as temporarily stopped. The corresponding figures for 16th April, 1956, were 1,186 and 1,074.

Dr. Stross: Would the right hon. Gentleman agree that these figures do not take into account the shrinking that has occurred in the labour force in the pottery industry as a whole, where some 10,000 workers—men and women—have been lost; and is he further aware that we fear that they may be entirely lost unless something is done as quickly as possible to assist them? I accept that it is not for his Department to do this.

Milk Marketing Board, Glenrothes

Mr. Hamilton: asked the Minister of Labour the estimated maximum labour requirements of the Milk Marketing Board's establishment to be set up in the new town of Glenrothes, Fife.

Mr. Iain Macleod: The labour requirements of individual employers are regarded as confidential, but I may state that the number is not large.

Building Industry Accidents (Advisory Committee)

Mr. J. Rodgers: asked the Minister of Labour what action he is taking to deal with the high rate of accidents in the building industry as reported in chapter 10 of the Chief Inspector of Factories' Report for 1955.

Mr. Carr: In addition to increasing the staff of the Factory Inspectorate, as recently announced, my right hon. Friend has decided to set up an advisory committee, under my chairmanship, representative of the organisations in the building and civil engineering industries primarily concerned. It is hoped that this committee will stimulate interest in these industries in problems of safety and health with a view to reducing the incidence of accidents and dangers to health.

Mr. Rodgers: Is my hon. Friend aware that the information which he has given will give great satisfaction to all sections in the House? Would he agree, since most of the firms in this industry employ twenty men or less, that the interest of these small firms should be kept clearly in mind?

Mr. Carr: Yes, Sir. I thank my hon. Friend for his first remarks and can assure him on the latter point. If we are to make progress here, we have to arouse the active interest of both sides of the industry, and we hope that this Committee will help to do that.

Workers (Temporary Transfer Scheme)

Miss Burton: asked the Minister of Labour whether he has any statement to make about arrangements to assist the temporary transfer of workers from areas where there is a redundancy of labour which is not expected to be permanent.

Mr. Iain Macleod: Yes, Sir. The new scheme applies to workers who have been unemployed for at least eight weeks, for whom there is no early prospect of obtaining suitable employment locally, and who continue to maintain dependants at home. Such workers who, on or after 11th June, with the prior knowledge of the local office of the Ministry of Labour, take up employment beyond daily travelling distance for which no suitable local unemployed worker is available, will be eligible to receive a free fare, a lodging allowance for a period of up to twelve months, and facilities to enable him to return to the home area to obtain employment there. The scheme will be available generally outside the areas covered by the present Resettlement Scheme, but will not be applied to workers who usually follow seasonal employment, nor in cases where similar assistance is normally provided by the prospective employer.
The rate of lodging allowance payable under this Temporary Transfer Scheme will be 35s. a week, and I have arranged that as from 11th June the lodging allowance under the existing Resettlement Scheme will be increased to the same amount.

Miss Burton: While thanking the right hon. Gentleman for that statement, I know he will appreciate that I shall certainly want to study it before commenting in detail on it. He has referred to seasonal work; will he give an assurance that he will not include the motor car industry in that category?

Mr. Macleod: Yes, of course.

Mr. Lee: The Minister spoke of seasonal workers. Supposing that they are going into work into which non-seasonal workers are going, how will he define them? Supposing a man has been engaged in seasonal work for a year or two and then transfers to a job of the type which the right hon. Gentleman has in mind here, how will the Minister differentiate between them?

Mr. Macleod: One would have to look at individual cases, but it seems to me to be a contradiction of terms to say that the man has been following seasonal employment steadily for a year or two. I think that this is irrelevant. Seasonal employment is not a new problem and, normally, a man engaged in that work is

expected to make his own arrangements. What we are trying to do, which, we believe, will be of considerable assistance in relation to mobility of labour, is that if people are at work in an area which, perhaps, for a short time runs into difficulties, they may be helped to take employment somewhere else, even though they intend to come back to the home area, and even though they leave their dependants in that home area while working elsewhere.

Mr. Robens: As this matter is surely tied to the recent statement about the disposition of our Forces in this country, would the right hon. Gentleman reconsider the request that we made for a White Paper dealing with the subject, and, perhaps, with the methods by which the Ministry of Labour are to get these people into employment in other parts of the country—lodging allowances and the rest?

Mr. Macleod: This matter goes wider than any of those that arise immediately out of the defence debate. On the defence debate matter, I am, within a few days, laying before the House a detailed explanation of the Government's plans. particularly for National Service.

Mr. Osborne: Can my right hon. Friend state how much the scheme is likely to cost?

Mr. Macleod: No, I am afraid it is not possible to give an exact estimate. The figure obviously depends on how many people use the scheme. We are sending out detailed instructions now and they will be available in most areas from 11th June.

Mr. Lee: Is it the Minister's intention to inform people at the employment exchanges about this; that, unless they get the instructions to go to these jobs from the employment exchanges, facilities regarding payment and the like will not be available to them?

Mr. Macleod: Some of these matters are not yet finally worked out. As I said in my statement, it is obviously important that they should go to their new jobs with the prior knowledge of the local office of the Ministry of Labour; otherwise, it is impossible to check that they have fulfilled the requirements which I have laid down.

Colour Prejudice

Mr. Sorensen: asked the Minister of Labour what recent action he has taken in respect of cases where men needed for employment have not been employed be cause of colour prejudice on the part of their prospective fellow employees; and what consultations have taken place on this matter between the officers of his Department and the trade unions.

Mr. Iain Macleod: I am aware of a recent case of this kind which has received some publicity. My officers have not been asked to intervene, but I understand that the employers are in touch with the trade union concerned, which is investigating the matter.

Mr. Sorensen: While appreciating the very good and useful work done by both the officers of the right hon. Gentleman's Department and the trade unions, may I ask him if it is not customary in cases like that for efforts to be made and the initiative to be taken by a local officer to try and clear up the matter?

Mr. Macleod: My officers at local employment exchanges do not exercise discrimination in any way, and when they see employers exercising it they do everything they can to persuade them not to pursue that particular line. In this case, we have not been asked to intervene. Although I will watch the position, it is probably best to leave it at the moment between the employers and the trade unions, who, I believe, are having a local meeting about it.

Shipbuilding and Engineering Industries (Reports)

Mr. Ellis Smith: asked the Minister of Labour if he has given consideration to the Reports of the Court of Inquiry into the disputes between the Shipbuilding Employers Federation, the Engineering and Allied Employers and the trade unions who have members affiliated to the Confederation of Shipbuilding and Engineering Unions; and what action he proposes to take.

Mr. Lee: asked the Minister of Labour whether he will make a statement on his intentions with regard to the suggestion of the Court of Inquiry into the dispute in the shipbuilding and engineering industries to set up an authoritative and impartial body to consider the wider

implications of the movement of wages, costs and prices.

Mr. Iain Macleod: I welcome the suggestion to which the hon. Member for Newton (Mr. Lee) refers. Such a proposal involves discussions with both sides of industry, and in the meantime the Government are giving urgent consideration to the form which such a body might take and the scope of its terms of reference. The other recommendations in the Reports are, of course, for the parties to the disputes to consider.

Mr. Ellis Smith: While accepting the Reports as a basis for reopening negotiations, which we hope will be successful in bringing about an interim settlement, does the Minister consider that the time has arrived when, if they are successful, a long-term agreement should be reached? If so, does he intend using his influence with a view to bringing that about?

Mr. Macleod: Of the three recommendations of the Court of Inquiry, the first is on wages, the second on the National Joint Council, and the third on this impartial body. The first two are essentially at the moment for the parties to the dispute, and I will not go into them, unless these negotiations break down; in other words, I hope not to go into them at all. The third does require Government action, and that is why these talks, which at the moment are informal, though they will probably lead to more formal meetings, are going on, and I hope we shall be able to follow this suggestion up.

Mr. Lee: On this point of the impartial body, is the Minister aware that a great deal must now depend upon the interpretation which the Government put upon the meaning of it? For instance, if it were to be merely an inquisition into wages, he could hardly expect full cooperation from the trade unions. If, on the other hand, it is a genuine effort to look at profits and the economic situation as well as wages, many of us would hope to see a really fruitful culmination of these suggestions.

Mr. Macleod: Yes; I understand that. It is exactly to those sorts of points that the present conversations are directed.

Mr. Grimond: While appreciating that the Minister is engaged in conversations now. would he say a little more of what


he really has in mind as to the field which this inquiry might cover? Is it to be a "once and for all" inquiry, for instance, or is it to sit for a certain time and take evidence over a long period? Secondly, unless it is to be the basis of a national wages policy, what exactly will it be able to consider? Are not the causes of strikes usually well-known, or, if they are not, there is machinery for finding them out, and the results of strikes, which are surely equally well-known?

Mr. Macleod: I should not like to be too precise at this moment, because these are the matters which are forming the basis of discussion, and I should not like to put a unilateral view about them. On one matter in the hon. Gentleman's question I think I would give a specific answer. It is that I would contemplate that this would be a standing body and not a "once and for all" inquiry.

Oral Answers to Questions — SCOTLAND

Loch Ness (Survey)

Mr. Hector Hughes: asked the Secretary of State for Scotland if he will avail himself of the great advances recently made in the use of underwater photography and television techniques for the purpose of seabed surveys and of marine biological and oceanographical research, in order to have Loch Ness surveyed.

The Secretary of State for Scotland (Mr. John Maclay): No, Sir. The expensive equipment required for these techniques is supplied to my Department for research, primarily at sea, in connection with the commercial fisheries.

Mr. Hughes: Does not the Secretary of State realise that he owes an obligation to science in this matter, and that recent learned works have indicated that such a survey might reveal the existence in Loch Ness of a prehistoric or unique monster, fish or reptile, of some kind, the discovery of which might add considerably to science?

Mr. Maclay: I am by no means satisfied that this somewhat "monstrous" suggestion would necessarily be in the best interests of the cause which, I think, the hon. and learned Member has in his mind.

Mr. Woodburn: Is it not the case that the monster comes to the surface to save us this expense?

Mr. John MacLeod: As the aquatic abilities of the hon. and learned Member for Aberdeen, North (Mr. Hector Hughes) are well-known, could not the Minister persuade him to go and have a look for the monster himself?

Export of Live Cattle (Report)

Sir W. Anstruther-Gray: asked the Secretary of State for Scotland whether he has now studied the report of the committee of inquiry into the export of live cattle to the continent for slaughter; and whether he proposes to carry out their recommendations.

Mr. Maclay: It is hoped to make a statement very shortly.

Sir W. Anstruther-Gray: While thanking my right hon. Friend for that reply, may I ask him if he will take steps to see that "very shortly" is not too long delayed, because the recommendations are designed to reduce suffering, and we want to reduce that suffering at once?

Mr. Maclay: indicated assent.

Rents, Dumfriesshire

Mr. Emrys Hughes: asked the Secretary of State for Scotland if he has considered a letter from the Dumfries shire Tenants Committee on the question of the recent increase in rents in the county; whether he proposes to receive a deputation; and if he will make a statement.

Mr. Maclay: I have told the committee that the rent to be charged for houses belonging to a local authority is a matter for the local authority itself. I have, however, indicated that my Department will receive the deputation which the committee proposes to send on 11th May and will report their representations to me and to the county council.

Mr. Hughes: Is the Minister also aware that these enormous increases of rent are not merely a problem for the local authority, but that this is an area in which there are incoming miners, and that the future of the coal mining industry and the output of coal depends on reasonable rents of council houses?


Will he keep in mind the fact that Mr. Moffat, President of the Scottish Miners' Union, recently warned the Government that if this position is not changed there will be serious industrial trouble and probably strikes?

Mr. Maclay: I have really nothing to add to what I have said. The Son. Member is going rather beyond the terms of his immediate question.

Mr. Woodburn: Is the right hon. Gentleman not aware that this particular increase at Dumfries has sent a shock through the whole of the tenancies in Scotland, and that people are really very alarmed? Are we to understand that it is to be the outcome of Government legislation that local authorities are to behave in what seems to be a quite irresponsible fashion?

Canals

Mr. Hannan: asked the Secretary of State for Scotland if he has yet been invited to submit his observations on the future of Scottish canals to the Bowes Committee of Inquiry on Inland Waterways; what is the nature of his proposals; and if he will make a statement.

Mr. Maclay: My Departments were invited by the Committee to submit written observations on certain questions relating to Scottish canals and did so in October last; but no proposals were made as to their future. That is a matter which will fall to be considered by the Government when the Committee's Report is received.

Mr. Hannan: Is the Secretary of State aware of the various danger-spots to children in the City of Glasgow where young people have access to the banks of the Forth and Clyde Canal? Will he use his influence with his colleague the Minister of Transport to urge the early production of this Report?

Mr. Maclay: I am aware of some of these danger-points, but I think we will have to await the Report, the subject of which is a complicated matter.

Education (Building Projects)

Mr. Hannan: asked the Secretary of State for Scotland if he is aware that delays occur in obtaining the approval of his Department for new schools and

buildings for technical education; and what action he proposes to take to remedy this state of affairs.

Mr. Maclay: Every effort is made to approve projects as soon as possible; but if the hon. Member will give me details of any case where he thinks there has been avoidable delay, I will have it investigated.

Mr. Hannan: Is the Secretary of State aware that it is the cost limit which he has imposed on local authorities and with which their estimates have to agree that is causing the delay, and if I send him particulars, as I will, will be look into this matter?

Mr. Hannan: asked the Secretary of State for Scotland if he will now increase the present cost limit of £3 6s. per square foot which governs educational building projects.

Mr. Maclay: The cost limit of 66s. per square foot, which governs school building only, is kept under review, but I am not satisfied that, with adequate planning and cost control, education authorities are unable to provide satisfactory schools within the limit.

Mr. Hannan: Is the Secretary of State aware that this cost limit was imposed in December, 1954, since when costs have risen? Since it is this cost limit which is delaying the planning of schools and technical buildings in order to carry out the Government's policy, will the right hon. Gentleman look at this matter again?

Mr. Maclay: As I have said, the cost limit is kept under review, but we must try to get the best value for money that we can in the interests of everybody.

Oral Answers to Questions — MINISTRY OF WORKS

Building Construction (Steel and Reinforced Concrete)

Mr. Osborne: asked the Minister of Works how much steel is licensed annually in building construction; in view of the shortage of steel, what experiments he is making with reinforced concrete; and how far he estimates this could replace steel structures and so save great quantities of valuable steel.

The Minister of Works (Mr. Hugh Molson): Steel for building is no longer licensed, but a very rough estimate of the


amount of steel used in building last year is 1¼ million tons. Reinforced concrete, which is a well established method of construction, is now generally adopted for Government buildings unless there is some good reason to the contrary. During the year ended June, 1956, some 160 framed buildings of all types were designed by my Department, and of these no less than 110 were in reinforced concrete framing.
I have no means of estimating the extent to which structural steel could be replaced in building generally by reinforced concrete.

Mr. Osborne: Can my right hon. Friend use his influence to see that reinforced concrete is used and a great deal of this 1¼ million tons of steel is saved for export? Many responsible architects feel that it is being wastefully buried in new buildings.

Mr. Molson: The figures I have given, showing to what extent the Ministry of Works uses reinforced concrete will, I hope, have the effect that my hon. Friend has in mind. In the case of the second half of the Whitehall Gardens building, we have chosen to use reinforced concrete instead of structural steel, and as a result we are saving £130,000.

Oral Answers to Questions — BRITISH ARMY

Trawsfynydd and Tonfannau Camps, Merionethshire

Mr. T. W. Jones: asked the Secretary of State for War if he will make a statement about the future of the Royal Artillery Camps at Trawsfynydd and Tonfannau, in Merionethshire, respectively.

The Under-Secretary of State for War (Mr. Julian Amery): Trawsfynydd Camp and Training Area will be sold as soon as field firing training can be transferred elsewhere and the land cleared of un-exploded bombs, and alternative accommodation found for the Army Outward Bound School.
No decision has been taken about Tonfannau.

Mr. Jones: Is the Minister aware that these camps are situated in an area where there is no hope of alternative employment? Will he consult the President of the Board of Trade and the Minister for

Welsh Affairs with a view to using these buildings for the introduction of some alternative industry, especially as the area contains the highest percentage of unemployment in the whole country?

Mr. Amery: I will certainly look into the point raised by the hon. Member. He will appreciate that if we have no further need for the area, it is difficult for the War Department to keep it on.

Mr. Mollish: But not for the Government as a whole.

Sporting Events (Compulsory Attendance)

Mr. D. Jones: asked the Secretary of State for War (1) whether he will make a statement concerning the compulsory attendance at a football match ordered by the commanding officer of B Squadron. 7th Royal Tank Regiment, on Saturday, 27th April, 1957;

(2) under what Army regulations weekend passes to soldiers of the 7th Royal Tank Regiment were cancelled and the men marched to a football match and ordered to cheer a particular team.

The Secretary of State for War (Mr. John Hare): The 7th Royal Tank Regiment took part in the final of the Northern Command football championship on 27th April at Catterick. The match was well supported by soldiers in the regiment, but in one squadron where the response was poor the squadron commander ordered about half his troops to attend. Sixty-five men were involved out of a regimental strength of approximately 1,000. They were free to leave camp at 4.30 p.m. after the game. No week-end passes were cancelled and nobody was ordered to cheer.

Mr. Jones: Is the Secretary of State aware that these men were ordered to parade and were marched to the football ground because they refused to attend voluntarily? Is it not the case that they were threatened with the withdrawal of their week-end passes unless they went? Does the right hon. Gentleman believe that this kind of treatment by responsible military officers is likely to help his recruiting campaign to get a voluntary army?

Mr. Hare: I am not aware of the first two allegations made by the hon. Member, but I will certainly look into them.


This was an isolated incident, and I do not think there is any question about the general liberty enjoyed by our troops at the week-end.

Mr. Strachey: Will not the right hon. Gentleman express his opinion that there surely was a mistake which should not be repeated?

Mr. Hare: I hesitate to do this. [HON. MEMBERS: "Why?"] Because, as the right hon. Gentleman knows, we must allow discretion to commanding officers. [Interruption.] If discretion is given to people, it is rather pointless to censure them for using it.

Mr. Swingler: Is the Secretary of State really saying that he is in favour of compulsory attendance at sporting events?

Mr. Hare: I did not say anything of the sort.

Mr. Jones: Is the right hon. Gentleman now saying that there was no authority for the withdrawal of these week-end passes? Is he saying that the commanding officer exceeded his duty by withdrawing these passes? If so, will he take the necessary disciplinary action?

Mr. Hare: I said I would look into that. I have not had that information and from the evidence which I have had I do not believe that it is correct.

Mr. Chetwynd: asked the Secretary of State for War whether he will abolish the compulsory attendance of troops at service sporting events.

Mr. John Hare: Attendance at sporting events outside duty hours is not normally compulsory. Commanding officers have discretion in matters of this kind, but it is the policy of the Army Council that the freedom of troops after working hours should not be unduly re-tricted.

Mr. Cherwynd: In the instance quoted by my hon. Friend the Member for The Hartlepools (Mr. D. Jones), when a commanding officer behaves with stupidity in a matter like this, is it not the duty of the Secretary of State to make sure that these things do not happen? Is not the only way to ensure that they do not happen to abolish compulsory attendance, which is quite ludicrous?

Mr. Hare: I have answered this question earlier. I still think that commanding officers should be allowed discretion; and if they are given discretion, we cannot censure them for using it.

Mr. Strachey: Will not the Secretary of State express his view for the guidance of commanding officers in future? It is a very small matter, but these things affect recruiting and are important in that respect. If the right hon. Gentleman expresses a view, it would be no censure and he would be doing something useful.

Mr. Hare: I have already covered the point.

Regular Recruitment and Compulsory Service

Mr. Swingler: asked the Secretary of State for War if he will state, on the basis of the rates of long-service voluntary recruitment and re-engagements in the last three years, what increases in the rates of long-service recruitment and re-engagement he requires in the next two years to be able to dispense with compulsory service in 1960.

Mr. John Hare: I propose to deal with this subject in my speech on the Army Estimates.

Mr. Swingler: In that speech, will the right hon. Gentleman be able to give the estimates for which I have asked? Can he give figures of the increase in recruitment that is required?

Mr. Hare: I shall not be able to do that, because that would be a matter of speculation.

Mr. Swingler: On the basis of the recruiting experience of the last two or three years, cannot the Secretary of State calculate what increase in recruitment of long-service volunteers is necessary to give him the size of volunteer army that the Government say they require by 1960?

Mr. Hare: I shall be able to do something on those lines, but the whole of this question will depend on the various factors affecting recruitment, which we are at present examining.

Mr. Strachey: Would not the Secretary of State agree that what it would really depend on is the production of suitable terms of service and other inducements to


an all-professional volunteer army? May we expect an early announcement from the right hon. Gentleman on those lines?

Mr. Hare: As I have said, I hope to be dealing with this subject, but I cannot anticipate what I shall be saying next Tuesday.

Military Personnel, Ghana (Pay and Allowances)

Mr. John Hall: asked the Secretary of State for War if the gross amount in pay and allowances paid to British officers and other ranks serving with the Ghana military forces is recovered in full from the Ghana Government.

Mr. John Hare: Yes, Sir.

Mr. Hall: If this amount is recovered in full from the Ghana Government, does it not mean that that sum is wholly earned in Ghana and that, therefore, British officers and other ranks should be entitled to pay the Income Tax in Ghana and not at the much higher United Kingdom rates?

Mr. Hare: As I think my hon. Friend realises, when civilians are employed by the Ghana Government they pay Ghana taxes, but when military personnel are seconded they remain directly in the employment of Her Majesty's Government in the United Kingdom.

Suez Contracting Companies (Employees)

Mr. Philip Bell: asked the Secretary of State for War (1) the total amount claimed by employees of the Suez contracting companies for loss of personal effects and compensation for illness attributable to internment, respectively;

(2) the total amount settled by the assessors in respect of claims by employees of the Suez contracting companies for loss of personal effects and compensation for illness attributable to internment, respectively; and how much of such total amount has been paid.

Mr. John Hare: I understand that the total amount claimed by the employees of the contracting companies for loss of personal effects in Egypt—excluding bank balances, which amount to about £100,000—is about £500,000. The independent assessors have not yet reported on all the claims. No payments

have yet been authorised. The companies are examining claims concerning illness attributed to internment. One ex gratia payment of £600 has been approved and four other cases are being sympathetically considered.

Mr. Bell: While thanking my right hon. Friend for that Answer, may I ask whether he can give any idea when the bill will be paid? I am sure he appreciates that there is a good deal of anxiety on this matter.

Mr. Hare: I cannot give any idea. All I can say is that I am urgently considering the representations which are being made, and I shall certainly do all that I can to arrive at an early settlement.

Mr. Philip Bell: asked the Secretary of State for War whether, in view of the fact that military exigencies prevented a fair opportunity being given to employees of the Suez contracting companies to leave Egypt so as to avoid internment, he will compensate such employees for such internment, which was the direct result of the actions of Her Majesty's Government.

Mr. John Hare: I understand that employees whom the contracting companies engaged in the United Kingdom for service in Egypt have been given substantial payments on account of the premature termination of their employment. I do not think that further compensation on the grounds of their internment would be justified.

Mr. Bell: Has my right hon. Friend given serious consideration to this matter, taking into account that these employees were, in a sense, doing Government work and that their position was no doubt very much prejudiced by his office in that a number of them were reserve officers and often letters were sent to them marked "War Office", which made them easy prey for internment as soon as hostilities started?

Mr. Hare: I have considered all the various points and many others which my hon. and learned Friend has not mentioned. I think that these people have been treated fairly, although, naturally, I have great sympathy for them. They have been given a lump sum payment which, I think, has been fairly and generously worked out for them.

Oral Answers to Questions — NATIONAL FINANCE

Cider (Tax)

Mr. Deedes: asked the Chancellor of the Exchequer how much revenue was collected in the financial year 1956–57 as a result of the cider tax imposed by the Finance Act, 1957; how many paid it; and how many were employed to collect it.

The Chancellor of the Exchequer (Mr. Peter Thorneycroft): Under the Finance Act. 1956, cider of a strength comparable with that of British wine is charged with British wine duty, but no separate figures are kept and no special staff are engaged in its collection.

Mr. Deedes: Whilst accepting the difficulty about keeping separate figures, may I ask my right hon. Friend whether he is aware that probably only a handful of cider makers are being called upon to pay his tax, with the result that the Customs and Excise officials are put to quite a disproportionate amount of work for a trivial amount of revenue in return? Could he have another look at the matter?

Mr. Thorneycroft: Not to charge the tax would be to discriminate openly in favour of perry and cider with equivalent strength to British wine.

Mr. John Hall: Is the Minister aware that most manufacturers of this kind of cider have already reduced the alcoholic content to escape this tax?

Mr. Thorneycroft: If that is so, they have the remedy in their own hands.

Garden Furniture (Tax)

Mr. R. Bell: asked the Chancellor of the Exchequer what would be the loss of revenue involved in extending the reduction of Purchase Tax from 30 per cent, to 15 per cent, in respect of other classes of furniture to garden furniture at present contained in Class 16 (b) of the Purchase Tax Schedule.

Mr. P. Thorneycroft: About £120,000 a year.

Mr. Bell: Is it quite clear that this applies only to garden furniture in Class 16 (b) and does not include elves and gnomes?

Nationalised Industries

Mr. Grimond: asked the Chancellor of the Exchequer what is his intention as to reducing the overdraft of the nationalised industries and as to their capital financing.

Mr. P. Thorneycroft: The total of the overdrafts of the nationalised industries has been reduced from £123 million on 15th August, 1956, just prior to the first Exchequer advances, down to a figure of £55 million on 17th April last, representing their current short-term need. I cannot yet make a statement about the Government's intention as to the financing of the industries after the expiry of the Exchequer's lending power in March. 1958.

Mr. Grimond: Whilst thanking the right hon. Gentleman for that answer, may I ask whether it is the case that their financing, whether long-term or short-term, will be done by overdraft until a decision is taken?

Mr. Thorneycroft: Rather the contrary. It was being done long-term largely by overdraft and, under the new method of financing, the overdraft is limited to short-term needs as in the case of ordinary industry.

Non-Industrial Civil Servants (London Airport)

Mr. Hunter: asked the Secretary to the Treasury what progress has been made in negotiations regarding the claim of non-industrial civil servants employed at London Airport to be paid at the London rate of salaries.

The Financial Secretary to the Treasury (Mr. J. Enoch Powell): The discussions to which I referred in my reply to the hon. Member on 12th March are still in progress; I hope that a settlement covering this claim amongst others will be reached shortly.

Mr. Hunter: Whilst thanking the hon. Gentleman for that reply, may I ask whether he will use his best endeavours to speed up negotiations, since this point has been outstanding for a very long period and is a real grievance among non-industrial civil servants?

Mr. Beswick: Will the hon. Gentleman also realise that, whilst complications on hours and arguments about provincial differentiation may drag on for


a very considerable time, the case of the London Airport employees is a quite insupportable anomaly? Will he make a decision on that without awaiting the outcome of negotiations as a whole?

Mr. Powell: I am not so pessimistic about the prospect of a comprehensive agreement.

Oral Answers to Questions — NUCLEAR TESTS

Dr. Stross: asked the Prime Minister whether he is aware of the fact that no threshold dose for radiostrontium may exist and that tests of nuclear weapons may already be responsible for some 50,000 cases of bone tumour in the future; and if he will therefore postpone the proposed British tests in the Pacific.

The Secretary of State for the Home Department and Lord Privy Seal (Mr. R. A. Butler): I have been asked to reply.
I assume that the hon. Member has in mind certain statements in a report recently published by the Atomic Scientists' Association. I would draw his attention to the very careful reservations made by the authors of this report; they state
 In giving these estimates it must be emphasised again that, apart from the considerable margin of error due to lack of adequate data, they are based on the as yet unproved hypothesis of a proportional relationship applying to very small doses.
And they go on:
 From this point of view they represent the most pessimistic approach.
I am informed that the estimates made in this report from the Atomic Scientists' Association are interpretations of factual evidence which was available last year to the Medical Research Council's special committee, but that the latter did not consider it an adequate basis to justify their making such calculations.
In these circumstances, Her Majesty's Government are not prepared to postpone the proposed tests.

Dr. Stross: Whilst accepting the quotations made by the right hon. Gentleman, may I ask whether he does not agree that, although no one dare be dogmatic about this rather terrifying risk that we are discussing and there is some doubt, any benefit of the doubt must be given

to posterity, and that we have no right to be euphemistic or optimistic about this matter, and the only possible way of approach is by pessimism and not by optimism?

Mr. Butler: I have in mind that the data available was before the Medical Research Council's special committee a year ago and we had it in mind at that time. Therefore, I am not prepared on behalf of Her Majesty's Government to make an answer, on behalf of the Prime Minister, saying that we would abandon the tests on the basis of the atomic scientists' report which comes a year later. I am prepared to take the matter most seriously and give the hon. Member the answer I have given, but I am not prepared to give any further conclusion.

Mr. Gaitskell: In view of the length of time which has elapsed since the Medical Research Council's Report, the number of statements made by scientists in various countries and the amount of additional evidence made available, could the right hon. Gentleman ask the Medical Research Council for a further report to bring the matter up to date?

Mr. Butler: I am certainly quite ready to do this, but I must honestly say that, since the Medical Research Council's Report was received and published, no relevant new fact has become available as far as we are aware. Some fresh estimates have been made of the rate of accumulation of radiostrontium in human bone, of which I have full particulars here that I have studied, but according to the information in my possession it would not be worth while doing what the right hon. Gentleman suggests. I will, however, certainly consider the suggestion and discuss it with my right hon. Friend.

Mr. Hamilton: asked the Prime Minister whether, in view of the conflicting views of world scientists on the harmful effects of nuclear bomb explosions, he will initiate the calling of an international conference of scientists in order to ascertain at least the minimum area of agreement.

Mr. R. A. Butler: I have been asked to reply.
The United Nations set up, in 1955, a Scientific Committee on the Effects of Atomic Radiation which is examining


these matters. My right hon. Friend does not consider it necessary to set up any other international body for this purpose.

Mr. Hamilton: Would the right hon. Gentleman not agree that the sooner we get a consensus of opinion among world scientists the better it will be for the allaying of public concern? Is he aware that, contrary to what the Prime Minister and the Foreign Secretary have said, the alarm about these explosions and prospective explosions is not coming entirely from Communists but is coming from people who are very violently anti-Communist and is a view which none the less is sincerely felt? Will the right hon. Gentleman undertake to look at the matter again to see whether we can get up-to-date information from all the world's scientists?

Mr. Butler: The Committee, consisting of most respectable representatives of the most respectable nations, last met in Geneva from 8th April to 19th April. The whole question of radiation hazards and the effects of strontium 90 was considered by the Committee, which is still collecting information, on which it will take some time to reach conclusions. As this is an international body of scientists, I should prefer to give it an opportunity to reach conclusions before we do anything else.

Mr. Gaitskell: Can the right hon. Gentleman say when the Committee is likely to produce a report?

Mr. Butler: No, because it is an international body in charge of its own procedure, but I will investigate and try to inform the right hon. Gentleman.

Mr. G. Thomas: In view of the disturbing statement made yesterday by the Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food about the rate of strontium radiation found in the Welsh mountains and in that district—[Laughter.]—Hon. Members may laugh, but they are not laughing in Wales—is not the Minister prepared to recognise that this is a new factor? How long have the Government had information about this, and will they continue to increase the amount of radio-strontium on these hills, thereby risking the well-being of future generations.

Mr. Butler: Those of us who have responsibility in these matters realise that

strontium on herbage, especially on elevations such as the Welsh mountains, is the most easy to calculate. But there is nothing I can add at present to the reply given by my right hon. Friend the Prime Minister, that so far the present averages measured in the United Kingdom are 67 of a unit for children under five years of age and much less for the rest of the population. The International Commission on Radiological Protection accepted 1,000 units as a maximum allowable for workers in special occupations. Therefore, so far, although it is a matter of concern that on herbage on elevations, especially in the Welsh mountains, there should be this deposit, we do not think the matter has reached a stage about which we need be unduly alarmed.

Mr. Bevan: Is it not extraordinary, when there is no doubt about the fact that these poisons are being spread throughout the atmosphere and that they are irreversible, that we should proceed to these tests before we get the report from the international body of scientists? If the extent of the poisoning is unknown but the fact that it is occurring is known, would it not be more civilised to stop all tests until we have the report?

Mr. Butler: No, Sir. The right hon. Gentleman is ignoring the march of science. It may be that through the process of tests we may find that the radiation effect is less marked than it is thought to be at present. It is certainly not the intention of Her Majesty's Government, for reasons of scientific appraisal and for reasons of the defence of the country, to abandon the tests at the present time.

Mr. Bevan: But has the right hon. Gentleman addressed himself to my question? As far as we understand, there is no doubt about the fact that poisoning is taking place. There is no doubt either that the poisoning is irreversible. What there is doubt about at the moment is its extent. Would it not, therefore, seem to be reasonable to everybody in all parties that until the facts are established by the international body of scientists, no more poisoning should be permitted?

Mr. Butler: No, Sir. I have said that for two reasons, namely, the scientific


and the question of national defence, we think the tests should proceed in the interests of all.

Mr. Philip Bell: Has my right hon. Friend had the advantage of any information supplied by the Soviet Republic on the poisonous effects of their tests?

Mr. Butler: I am afraid that I cannot answer for the Soviet Government, nor have we any scientific data on that subject.

Mr. Gaitskell: Can the Lord Privy Seal seriously argue that a postponement of these tests until the report is available would seriously endanger our national defence, or, indeed, interfere with the march of science?

Mr. Butler: I am following, with I think absolute justice, the line which my right hon. Friend the Prime Minister has followed, and I think rightly followed, for the two reasons I have given— namely, in the forward march of science tests are necessary; they are also necessary in the interests of national defence.

Several Hon. Members: rose—

Mr. Speaker: Order. It is after time.

Oral Answers to Questions — FOOTBALL INDUSTRY

Mr. J. P. W. Mallalieu: asked the Prime Minister whether he will recommend the appointment of a Royal Commission to examine the affairs of the football industry.

Mr. R. A. Butler: I have been asked to reply.

No, Sir.

Mr. Mallalieu: Is the right hon. Gentleman not aware that there is considerable evidence of corruption in this industry and that there is some evidence of tax evasion? Are these matters not proper subjects for investigation?

Mr. Butler: From my experience of the authorities, I am sure that they are quite capable of dealing with tax evasion. I should prefer to leave the affairs of the football industry to the industry itself. If there is some industrial conciliation procedure, as was the case in 1951, and some dispute on industrial conciliation, it would be a matter for the Minister of Labour, but beyond all that we had better leave the industry to work out its own affairs.

Orders of the Day — FINANCE BILL

Order for Second Reading read.

3.34 p.m.

The Financial Secretary to the Treasury (Mr. J. Enoch Powell): I beg to move, That the Bill be now read a Second time.
As Finance Bills go, this is not a long one. In fact, both in number of Clauses and in number of pages it is much below the average length of Finance Bills since the war. A great part of the Bill will also, I hope, be found to present no great complexities, and even those provisions which, at first sight, are somewhat daunting—in particular, possibly, those in Part IV of the Bill, on overseas trade corporations—will be found on examination to yield to a simple approach and a logical analysis.
It will, I believe, meet the convenience of the House if, this afternoon, I deal briefly with those provisions of the Bill which reproduce detailed Resolutions of the Committee of Ways and Means, and have already been the subject, therefore, of protracted discussion during the Budget debates. In this way I can reserve most of my time for the proposals which could be scarcely more than adumbrated, either in the Ways and Means Resolutions or in that debate.
The contents of the Bill can be classified roughly into four groups: those which deal with indirect taxation, those which deal with direct taxation, those which make various adjustments in taxation law and, finally, the proposals, to which I propose to devote the concluding part of my speech, concerned with assistance to British trade.
Among the proposed changes in indirect taxation, which will be found in Parts I and II of the Bill, the most important are the linked proposals on Entertainments Duty and television duty and the reductions of Purchase Tax. As from last Sunday, Entertainments Duty has been payable only on cinema shows and public television shows—shows, that is, where a televised picture is cast upon the screen instead of a film picture. The existing machinery for levying the duty remains unchanged, but the opportunity has been taken in the First Schedule to the Bill to recodify the existing exemptions.
The First Schedule, however, will not come into force until the Bill is upon the Statute Book. Therefore, the extension of the relief for cinemas in rural and sparsely populated areas has been brought into effect simultaneously with the new rates of duty, that is, from last Sunday.
The substitution of a flat rate for the existing highly complex tables of duty will, in practice, give the greatest reduction of duty on tickets in the popular ranges up to 2s. 6d., and will, incidentally, remove what I believe has been a considerable grievance on the part of cinema proprietors, that they could not make even a very small adjustment in the price of a ticket without attracting a disproportionately large increase in the duty payable.
As to the finances of the industry, this will reduce the estimated gross liability of exhibitors by about £6½ million in a full year. After account is taken of the share which falls to distributors and producers, including the increase of up to £1¼ million in the levy provided for by the Cinematograph Films Act, the net relief to exhibitors will be about £3½ million in a full year. I mention this because it is, of course, quite fallacious to argue as if the whole of the levy, the £2½ million or more which is in payment at present, as well as the increase of up to £1½ million, should be offset against the remission provided in the Bill.
The television duty, as my right hon. Friend explained in his Budget speech, will, in the current financial year, bring in approximately the amount of the remission in Entertainments Duty on the cinema. There is only one point which I should mention in this connection. It is whether the duty should be payable, rather like the Motor Vehicle Duty, for periods shorter than a year, at the option of the taxpayer. This, however, is a duty upon the television licence, which itself is issued only for a whole year at a time.
The amount of the duty is, of course, extremely small, both in comparison with those other duties which are payable quarterly or for shorter periods, and also with the costs which the owner of a television set is already incurring. The annual cost of running a television set, I am advised, can scarcely be put at less than £7 a year, or £10 including the licence. This expense is of a kind which tends to fall in considerable sums at one


time. I do not think that it can be argued that the duty of £1, representing 10 per cent, at the utmost of the annual cost, will in any circumstances cause such hardship as to justify the extra administrative cost and difficulty of an option to pay quarterly or monthly.

Mr. A. E. Hunter: Will the hon. Gentleman bear in mind that there is heavy Purchase Tax on television sets? It amounts to a very large sum.

Mr. Powell: The larger the outlay which the owner of a television set is called upon to pay, the smaller will be the
proportion of his annual outlay represented by this duty.
The alterations in Purchase Tax in Clause 6 do not call for further comment or explanation at this stage. Before leaving the changes in indirect taxation, I want to add only the following on the minor provisions. The duty on imported hops and substances derived from hops, together with consequential duties and drawbacks on beer, was first imposed in 1925 for a four-year period.
It was at that time given this temporary duration, because in those days, as the speech of my right hon. Friend the Member for Woodford (Sir W. Churchill) clearly indicated, it was necessary to tread exceedingly warily with even the smallest departure from Free Trade principles. In the event, it has been renewed whenever necessary from that time to this, seven times in all. As it fell for renewal again this year, and as no one in present circumstances would be prepared to contemplate its abandonment, the proposal is that the duty should now remain until Parliament otherwise determines.
I believe that commerce will find the provisions of the Second Schedule, to which Clause 5 looks forward, for simplifying the calculation of Customs duties on composite goods, as much of a boon as it will be to the Commissioners of Customs and Excise. With no appreciable alteration one way or the other in the actual amount of duty paid, the change should bring a useful reduction in costs of collection. I am hoping for a saving of more than £25,000 a year. The provisions have been so drawn as to prevent advantage from being taken of this simplification to the detriment of either the Revenue or of trade competitors.
Turning now to Part III of the Bill, on the main changes in direct taxation covered by Clauses 8 to 12 I can be very brief. They enact the four main alterations proposed: the increase in the upper limit on earned income relief, the increase in the allowances for children aged 11-plus and 16-plus respectively, the higher starting point for Surtax in the case of persons with dependants and family responsibilities generally, and, finally, the improvements in age relief.
The first of these improvements in age relief raises the limit of total income for the existing relief from £600 to £700. As the House knows, this relief at present gives the equivalent of two-ninths earned income relief on the unearned income of a taxpayer who is either himself aged 65 or over, or whose wife is, where the total income does not exceed £600. Clause 10 (2) now raises that limit to £700. The other form of age relief is new and consists in the exemption from tax of single persons aged 65 or over with a total income not exceeding £250 and of married couples, where at least one is 65 or over, and the total income does not exceed £400.
I have emphasised "total income," for I note that there has been some misunderstanding of these proposals in the sense of taking this to be an exemption of the first £250, or £400, as the case may be. That, of course, is not the effect of the proposal at all. Apart from slight marginal relief, the concession does not apply to people where the total income exceeds the figures I have stated. This, of course, follows from what is the purpose of the concession which is not to give relief to all taxpayers aged over 65, but to exempt the elderly who are living on the very smallest taxable incomes.
The rest of Part III of the Bill and Parts V and VI deal for the most part with a number of adjustments of the tax law and the House will wish to have some explanation of these. Clauses 15 and 16 deal with Schedule A. The former will correct an anomaly which was revealed by the Court of Appeal judgment on 22nd March in the case of Gatehouse v. Vise and it arises in the following way. In recent years the custom has sprung up of letting flats on a long lease at a low rent for a premium. The general rule for Schedule A in the case of a building let in parts was, and is, to


charge the landlord, and where the letting is at a full rent no difficulty arises.
In the premium cases, however, where the letting is at an extremely low rent, there was an apparent conflict between two legal rules and in 1954, the Inland Revenue was advised that in these cases the occupier should be charged, a practice which was announced by my predecessor in July, 1954. The Court of Appeal, however, has now found that the landlord has all along been liable, though two of the members of the Court expressed the view that this result was anomalous and that legislation might be needed. Clause 15 accordingly removes the anomaly and, as from the current financial year, makes the occupier chargeable in those cases, as he would be in the normal case of a similar long lease of a separate house.
The other Schedule A proposal in Clause 16 is of limited effect and merely serves to preserve the status quo in Scotland and Northern Ireland, in both of which countries, although in different ways, rating is in a condition of transition. In Scotland, the abolition of owner's rates and the consequential reduction in rents would have the effect of reducing the assessment for Schedule A and, consequently, of reducing the repairs allowance for Schedule A, with the somewhat unexpected effect that in a number of cases the liability under Schedule A, so far from being reduced, would actually be increased. This Clause will prevent that somewhat surprising result from arising.
In Northern Ireland, there has recently been a revaluation of property for rating which, but for the Clause, would have to be followed for tax purposes, and so would increase the liabilities of the taxpayers of Northern Ireland under Schedule A. It is clearly wrong that this should happen in one part of the United Kingdom and not in the whole.
Clause 17 makes a change which was announced by my right hon. Friend on 22nd February, in connection with the House of Commons Members' Fund Bill, which passed through this House last week. It is, in a sense, consequential upon the tax relief in respect of their contributions to this Fund which was given to hon. Members in last year's Finance Act. So, although the pensions and other periodical payments made out

of this Fund are subject to income limits, they will now be treated for tax purposes as are pensions generally, that is to say, the payments will be liable to tax as earned income and the contributions will rank for tax relief.
Clause 18 cures an anomaly in the existing law, whereby the question whether a maintenance payment is to be paid with or without deduction of tax depends not only upon the amount of the payment, but upon the question whether the allowance happened to be awarded in a magistrate's court or in the High Court. Such a distinction is clearly indefensible, and the Clause removes the anomaly.
Clause 19 is of particular importance to Colonial Territories which, on emerging into independence, will be setting up central banks of their own. It will make it possible for Her Majesty's Government to enable them, if they decide to keep their currency reserves in sterling in this country, to do so without incurring tax upon them.
A further minor adjustment of the law is made in Clause 37, in Part VI. In 1954, a block of capital was transferred from the British Electricity Authority—as it then was—to the South of Scotland Electricity Board in the form of a loan. Clause 37 makes the consequential adjustment of enabling the Central Electricity Authority to transfer to the South of Scotland Electricity Board, along with the loan itself, the disallowance of part of the interest paid on it for Profits Tax purposes.
I now come to the last of these minor adjustments, which have necessarily been somewhat dry and tedious. Clause 36 deals with a difficulty which has arisen over arrangements for widows' and dependants' annuities, made under the provisions of last year's Finance Act. Some arrangements for this purpose, made under trust schemes and contracts, empower the person who makes the scheme to revoke the annuity and replace it by a lump sum payable to his personal representatives, and although this option may never be exercised, and the annuity so become payable on his death, nevertheless, as the law stands at present, the value of the annuity must be fully aggregated for Estate Duty. The Clause corrects this obvious unfairness by providing that when the option has not been exercised, these annuities, like the rest,


will qualify for the favourable treatment for Estate Duty provided in last year's Finance Act.
The question of Estate Duty brings me to the two provisions which the Bill contains against the avoidance of tax. The main one, which is enshrined—if that is the right word—in Clause 35, deals with the avoidance of the five-year requirement for exemption from Estate Duty of gifts inter vivos. At present, a gift escapes duty even though the death of the donor occurs within five years of the gift if, in the meantime, it has ceased to exist—as, for example, where it consisted of securities which have matured. Moreover, in circumstances where the gift has attracted or carried with itself any accretion, as by qualification for an issue of bonus shares or the like, that accretion escapes duty even though it might have been foreseen and deliberately produced.
The Clause will end these forms of avoidance by rendering the recipient liable, on a death within five years of a gift, upon the value of the property substituted for the gift which has disappeared, or upon the value not only of the gift itself, but of any assets which it has attracted in the way that I have explained.
I should perhaps point out that the application of this Clause to all deaths occurring after the Royal Assent is in no real sense retrospective taxation. All changes of Estate Duty, together with its original imposition, have run from a current date, and in the case of gifts made before Budget day, and made deliberately in such a way as to avoid Estate Duty by any of the methods now ruled out, it could scarcely be said that such expectations as will be defeated were legitimate ones.

Mr. Geoffrey Hirst: Why not?

Mr. Powell: In any case, if such arrangements are now thought disadvantageous, there will be time before the Royal Assent to the Bill to alter them.
The other provision against avoidance is contained in Clause 14, which deals with a set of circumstances which can arise particularly in connection with shipbuilding. It can be the case that the firm which orders the building of a ship and provisionally pays part of the cost is not

the firm which, when the ship is completed, takes delivery for full cost and operates it. I illustrate the case by reference to ships, although it applies to all kinds of plant and machinery. As the law stands it would be possible for an initial allowance or an investment allowance, as the case may be, to be obtained by both firms, that is, twice in respect of the same asset. The Clause will secure that in such circumstances the benefit of the investment or initial allowance is not enjoyed twice over.
I have now reached the threshold of the final part of my speech, which relates to assistance to British trade. Before I cross it, however, there is one miscellaneous provision to which I must refer, namely, that contained in Clause 38, which reduces the size of the National Land Fund. That provision finds its place in the Finance Bill not because it imposes or remits a tax; and still less because it has anything to do with expenditure. It is included simply because it represents an operation upon the National Debt. In 1946, the National Debt was increased by £50 million to create this Fund. Since then the interest upon the Fund has been credited to it, bringing it to a total maturity value today of nearly £60 million. The amounts spent to date upon the purposes to which it can be devoted have totalled less than £2 million.
In its Third Report in the Session 1953–54 the Committee of Public Accounts submitted to the House the following recommendation:
Your Committee think it undesirable in principle that substantial amounts of public money for which there is no foreseeable need should be kept in special funds or accounts outside the direct control of Parliament. They therefore recommend that the Treasury should consider the desirability of legislation to return to the Exchequer some part of the large, and growing, balance of the National Land Fund.
In accordance with that recommendation, Clause 38 will reduce the Fund to £10 million by writing off the debt to the amount of the difference between that figure and the present maturity value of the Fund. The budgetary effect will, of course, be extremely small. It amounts to merely the amount of the annual interest payable on the debt, which is now being written off, for there is no question here of raiding or appropriating a fund.
The reality behind all this is simply that each year the Exchequer forgoes a certain amount of revenue by way of Estate Duty in order to secure for the nation land, houses and works of art; and it makes good that deficiency from the Fund, which, in effect, means, since the Fund is already re-lent to the Exchequer, from current borrowing. There is, indeed, a good case, since the amount of Estate Duty thus forgone fluctuates so unpredictably from year to year and cannot easily be the subject of ordinary estimating, for meeting this kind of outlay in this way.
I come, lastly, to the two proposals in the Bill designed to assist British overseas trade. That dealt with in Clause 13 relates to the shipping industry which has to compete directly with companies resident and taxed in countries having much lower rates and more favourable conditions of taxation than our own. In view of the character of shipping operations, which, for the most part, are carried on at sea, this places British shipping at a special disadvantage in the markets of the world.
The proposed assistance takes the form of doubling the investment allowance which the shipping industry virtually alone now enjoys. The effect, of course, is that in the first year 40 per cent, of the cost of a ship is relieved of tax, while the full cost is still allowed for tax. over the years appropriate for its depreciation; that is to say, broadly speaking, sixteen years in the case of a tanker and twenty years in the case of a dry cargo ship. Thus, 140 per cent, instead of 100 per cent, of the cost of the asset is allowed for tax.
Putting the matter another way, the investment allowance and the annual allowance—if it is calculated by the "reducing balance" method—together have the effect of writing off the cost of a ship in six years in the case of a tanker and seven years in the case of a dry cargo ship. Or, if the "straight line" method is adopted, the periods will be ten and twelve years respectively.
I realise that such a concession will not meet those who argue for depreciation on some new basis altogether. But it does represent a notable further aid to an industry which, as I have explained, is at a special competitive disadvantage. The shipping industry has, in fact, recognised

this and I see that on 11th April the President of the Chamber of Shipping, referring to this proposal, said that it
 is a substantial move towards putting British shipowners in a competitive position with lower taxed foreign owners and is very welcome by the industry.
While Clause 13, with which I have just been dealing, is concerned with a single industry, Part IV of the Bill relates to a wide range of trading activities carried on abroad by British companies. The purpose of this part of the Bill is to free British companies engaged in industry and commerce abroad from the handicap of having to pay United Kingdom Profits Tax and Income Tax upon the profits of their business which they plough back or retain as reserves.
From this single and simple aim flow all the conditions and limitations which are contained in Part IV of the Bill and five of the Schedules, for it is the Government's determination that no tax advantage shall be secured in respect of any profits which are not genuinely made overseas, that no profits which are in any sense distributed shall escape tax, and that there shall be nothing in these provisions that would have the effect of an export subsidy or of enabling British firms to escape from their proper tax liabilities either overseas or at home. In short, the object is not to confer a privilege, but to remove a handicap.
From what I have just said it follows, in the first place, that it is only on undistributed trading profits that exemption will be allowed. Great care has been taken to include under the concept of distribution not merely dividends in the ordinary sense, but every channel through which the profits made by an overseas trade corporation could find their way out of the business and into other hands. Moreover, trading profits are most care-fuly distinguished from investment profits, and, as I have said, it is to the former only that the terms of the exemption apply.
In the second place, an overseas trade corporation cannot carry on any trade or business in the United Kingdom and may not even take delivery of any goods at any point inside the United Kingdom. At the earliest it must take delivery free on board a ship or aircraft. These provisions are to secure that no profits arising from any trade, activity or process carried


on in the United Kingdom find their way by some means or other into trading profits qualifying for exemption. The House will notice, however, in the proviso to Clause 21 (1), that the mere employment of a broker in this country to sell goods produced overseas in one of our commodity markets would not disqualify a company from being an overseas trade corporation.
However, even if it carried on no operations here itself, other than those inseparable from control and management, the company might still, by some form of collusion or other, contrive to buy from or sell to firms in this country at such prices that, in effect, profits were shunted into the exempted category as trading profits of an overseas trade corporation. Therefore, the powers which the Commissioners of Inland Revenue already possess to police the prices charged or obtained in such transactions between associated companies which are resident and nonresident respectively—that is, their present powers in Section 469 of the Income Tax Act, 1952—are expanded by Clause 28 of the Bill to cover all sales by or to overseas trading corporations, whether any definable association between the parties exists or not. The Commissioners will, in fact, find this power easier to exercise than their present power under Section 469, to which I have referred, because at present they may well not get the accounts of the non-resident companies concerned, whereas they will, of course, receive the accounts of the overseas trade corporation as well as of companies taxable in the United Kingdom with which it has these transactions.
It is not the intention that overseas trade corporations should escape tax altogether. This is the main reason why shipping and air transport, which are normally taxed only in the country where the company is resident, are excluded from the scope of overseas trade corporations; and for greater security the special provision in Clause 21 (5) has been included, to the effect that the company cannot be an overseas trade corporation unless it would be liable to Income Tax on all its trade somewhere or other in the world, assuming that there were in other countries a tax analogous to Income Tax in this country.
The simple effect is to ensure that we would not have a case of a company which, in effect, escapes tax at both ends, both tax in the United Kingdom and whatever tax there may be in the country where it is operating. The activities of banking, finance, and insurance—

Mr. Bernard Braine: I wonder whether my hon. Friend would explain that a little further? As the Bill is drafted, and as I understand it, it does not give exemption to overseas trade corporations in respect of funds received from subsidiaries operating and registered abroad. My hon. Friend will recollect that the Royal Commission on the Taxation of Income and Profits recommended that such subsidiaries should be included. Does he not think it equitably and politically unwise that branches of overseas trade corporations should have this concession, but not subsidiaries which may have local nationals on their boards?

Mr. Powell: It is quite true, as my hon. Friend says, that a company resident abroad or in United Kingdom tax parlance a "non-resident company" cannot, under the terms of this Bill, be an overseas trade corporation. I am aware of the problems which that exclusion raises. Nevertheless, there are severe difficulties in bringing non-resident companies into the scope of overseas trade corporations. Perhaps my hon. Friend will agree that that is a matter which we can explore in detail during the Committee stage discussions.

Mr. Peter Remnant: Do not the profits of subsidiaries to an overseas trade corporation which is registered in the United Kingdom come under the heading of invested income under Clause 32 rather than under trade income?

Mr. Powell: Yes, but, of course, the investment income does not attract exemption. The investment profits do not attract exemption under the Bill, so that it does not really matter one way or the other.

Mr. Remnant: But if all the capital is supplied from the United Kingdom to the overseas trade corporation it is, in effect, profits earned abroad. So why should it not benefit?

Mr. Powell: Perhaps I shall meet my hon. Friend's point if I say that,


obviously, an overseas trade corporation will be able to invest abroad its trading profits on which, under this Bill, it has not incurred Profits Tax and Income Tax and will be able to enjoy an investment income from it. I hope that that meets the point raised by my hon. Friend.

Mr. Braine: This is very important. As the Bill is drafted, it means that a subsidiary which is resident and managed abroad cannot have profits remitted to the parent company and then transferred to another subsidiary, thus aiding company development. Surely that is not what the Royal Commission intended, or what was promised us last year by the former Chancellor of the Exchequer.

Mr. Powell: I appreciate the point made by my hon. Friend. It flows from the fact that a non-resident company does not, under the Bill, qualify as an overseas trade corporation.
I have mentioned that when we come to look at this, we shall find there are very great difficulties—I do not say that they are necessarily insurmountable—in bringing a non-resident company within the category of an overseas trade corporation.
The activities of banking, finance and insurance are also excluded, because it would be difficult to say of any concern of that kind that its day-today operations can be separated from the activities of central control and management.
Part IV of the Bill, taken as a whole, removes from British companies genuinely trading wholly overseas the handicap of United Kingdom rates of tax upon their trading profits without obliging them to remove their control and management from the United Kingdom; and it will also enable them to use the profits of one trade overseas for building up another trade overseas without incurring United Kingdom tax in the process. These provisions fulfil—my hon. Friend has drawn attention to this—in principle the recommendations of the Royal Commission in Chapter 24 of its final Report, and they meet the requests in the debate on last year's Finance Bill that those recommendations should be put into effect.

Mr. Roy Jenkins (Birmingham, Stech-ford): I understood that the intention

of the Government, in accordance with the majority Report of the Royal Commission, had perhaps been moving recently away from the discrimination between distributed and undistributed profits. This provision, relating, of course, only to overseas traders in so far as it concerns them, introduces a new discrimination between distributed and undistributed profits. I wonder whether the hon. Gentleman can tell us to what extent this marks a change in the view of the Government, whether it means that they are not moving in favour of removing discrimination generally.

Mr. Powell: I think that the hon. Gentleman has brought into juxtaposition two matters which are not really connected. If the object of this change in the law is to enable British companies, controlled and managed in this country but trading abroad, to plough back the profits which they make abroad into their businesses abroad without being penalised by United Kingdom tax, it follows of necessity that the exemption must apply to the undistributed profits, namely, to the profits devoted to that purpose.

Mr. J. T. Price: May I put to the Financial Secretary a question which I ventured to put to the Chancellor of the Exchequer when he was speaking on this in the Budget debates? Having listened with rapt attention to this very complicated and technical discourse, which has already sent several hon. Members in despair from the Chamber, but which I have endured until now, can he explain to the House, in simple terms, how the British economy, or the financial system of this country, will be strengthened by operations or manipulations which merely allow British capital to be used without employing British labour or refunding British revenue?

Mr. Powell: It is rather curious—I have noticed it before—that the hon. Gentleman always intervenes just when I am passing to the point in my argument to which he is referring. I was going on to say that it is extremely difficult to estimate the immediate loss of revenue which will result from these concessions. The estimate of £25 million in the current financial year, rising to £35 million in a full year, which was given in my right hon. Friend's Budget statement,


is based on an assessment of the present revenue from the undistributed profit of British firms which it is believed will qualify or be able to reorganise themselves so as to result in overseas trade corporations being set up. They will mainly be, no doubt, in overseas mining, including oil extraction, overseas plantations—tea, coffee, rubber, and so on— and various kinds of manufacture and assembly overseas.
In so far as these provisions achieve their aim, they will mean in the short run, as the right hon. Gentleman the Leader of the Opposition has pointed out, and as, indeed, my right hon. Friend, in his Budget speech, mentioned, that an element will be added to the debit side of our balance of payments. It is impossible to evaluate all the factors which will determine the size of this element. While £35 million will no longer have to be remitted in tax, a considerable amount of that sum may still find its way back by way of reserves and dividends. Additional investment from this country in overseas trade corporations and purchases here by them may be offset by an increased volume and improved terms of trade and by additional foreign investment in British companies.
In the long run, however, the advantages cannot be doubted. The more rapid and greater expansion of United Kingdom controlled companies trading overseas will mean in after years a broadening flow of dividends to shareholders in this country and of invisible exports to the United Kingdom. The disadvantage temporarily expected on our revenue account and in our balance of payments is a thoroughly sound investment for future years.
This, indeed, is the note upon which I would commend the Finance Bill as a whole to the House. Over 35 per cent, of the cost of its provisions in a full year goes directly to the strengthening of British trade and commerce. As to the remainder, no small part of the wealth which the State will leave in the hands of those who created it will find its way to expand our production and increase our well-being in years to come.

4.20 p.m.

Mr. Gordon Walker: The Financial Secretary said that this Finance Bill was somewhat shorter than the

normal one. It is certainly no less complicated than the normal one. I have a feeling that Finance Bills are becoming year by year more and more unintelligible and more and more difficult to follow in their details.
The hon. Gentleman delivered himself of one extraordinary doctrine—the higher the tax the less does the additional tax matter—when he was talking about the duty on television sets, a doctrine which he is not inclined to apply to Surtax. Most of the points which the hon. Gentleman has made will be dealt with in the course of speeches on the Bill. We are very grateful to him for the very lucid way in which he went through the Bill and for the very careful analysis he made of it.
The hon. Gentleman, of course, had to work on the basis that all parts of the Bill were equally good because that is his brief. I hope to give a rather more balanced review of the Finance Bill. It certainly contains some good things, but it contains some very bad things, and it contains a number of things on which we need to think further. The shortness of time between the First and Second Reading of the Bill is, I think, without precedent for a Finance Bill, and we feel that we have not been quite properly and fairly treated in this matter.
Let me deal first with the better parts of the Bill. I begun with Clause 1, dealing with the Entertainments Duty. We do, of course, welcome the remission of duty on the theatre and on sport—for which we have long pressed ourselves and which figured in our last Election programme. We shall have something to say on the degree of relief to cinemas but in the main, the comments which I want to make on the Entertainments Duty are the two which follow.
The first is that the remission of tax on sport coincides with a moment in the football world when it seems to be rent with divisions, recriminations and mass confessions. The root of all this, so far as I can see, lies in the question of labour relations in that sport, business or industry—labour relations which seem to be very archaic and reminiscent in some ways of the slave market. Moreover, people can be submitted to secret trials which can deprive them of their livelihood.

Mr. Cyril Osborne: That is the trade union movement.

Mr. Gordon Walker: It is very interesting that in the opportunity State in which the hon. Member believes footballers have to emigrate because they can get only £15 a week or so here and can get £60,000 in Italy.

Mr. Osborne: We have still to learn of one being sent to Coventry or committing suicide because of the unkindness of his brothers.

Mr. Gordon Walker: No doubt the hon. Member will be eager to apply his own principles where he can, including the football world. I think that despite what the Lord Privy Seal said today, there is a good case for an inquiry, and we shall want to discuss the remission of Entertainments Duty in the light of these considerations.
The other comment that I want to make is on the failure of the Government, in regard to the television duty, to give any relief to old-age pensioners, hospitals and similar institutions. That is something which we deplore and will do our utmost to make good.
We welcome, of course, as we must, the reduction of the Purchase Tax on pots and pans, so far as it goes. I do not think that the Government can claim much credit for it. It is only half reversing a tax which should never have been put on. It is rather like a husband claiming credit not for stopping beating his wife, but merely for beating her half as hard as before.
The child allowance, graded by age, is obviously to be welcomed. It is my belief that everything possible should be done to help the children at school, but this relief applies naturally and necessarily only to those who pay Income Tax. It might be better to give this relief in the form of maintenance grants, graded in the same way by age at 12 and 16, because that would give relief not only to the Income Tax payers as at present, but to people who do not pay Income Tax, and who find it a heavy burden to keep their children at school. It is a matter which I hope the Chancellor of the Exchequer will think about. I do not know what the cost would be to extend this relief to those below the Income Tax paying level to help them to keep their children at school.
The anti-avoidance measures in regard to death duties are to be welcomed but they should have come sooner. My right hon. Friend the Member for Huyton (Mr. H. Wilson) has for several years now been telling the Government that the Estate Duty had become, in effect, a voluntary tax. The former Financial Secretary used to hold up his hands in horror, like a shocked maiden aunt, when we said these things about tax avoidance, and he twitted us for being irresponsible, but these proposals in the Bill show that what we said in regard to Estate Duty was correct. The Chancellor has admitted that, although belatedly. I agree with the Financial Secretary that it is right than when a deliberate attempt has been made to avoid or evade the spirit of the law that should be checked as early as possible, even if the steps taken to evade the law have been taken before the Bill actually passes into law.
One of the consequences of these measures about tax avoidance is that the law on gifts inter vivos has become inextricably complex. It is one of the most difficult parts of the Bill to understand. Nor do we know if new ways have not already been found to get round some of these provisions. We know that ingenious gentlemen who make a profession out of giving advice on how, within the law, to get round taxes think very far ahead. This whole field of difficult law could be greatly simplified if we had a tax on gifts inter vivos, as is done in the United States. It would get rid of that ghoulish waiting for donors to live more than five years and of the great inequities that follow from whether a donor lives for five years or not. The United States has such a tax. It would obviously be perfectly workable and simplify immensely this whole question of Estate Duty legislation, and the attempts to stop its evasion by gifts inter vivos.
I should like to say a word about the Surtax changes in the Bill. We are not against breaking through the £2,000 "sound" barrier, as has been done in Clause 12. There is very clearly a case for some concessions for people who earn above or below £2,000 a year income, although in this Bill all the concessions go to those with incomes above £2,000 a year. Any such concessions must, of course, be on condition that they are part of a generally equitable range of tax changes, which is certainly


not the case in this Bill, and on condition that the redistribution is mainly achieved within the general Surtax range. I feel that the Surtax changes—I am referring to those in Clause 12, the breaking through of this £2,000 a year limit, for which there is a good deal to be said —ought to be accompanied by measures for broadening the basis of tax, in particular by a tax on capital gains.
Hon. Members opposite are always telling us about the "poor Surtax payer", but they never mention those who get capital gains scot free. There is a great deal of inequality here between one and the other in this high level of earning.

Mr. Gerald Nabarro: What about football pools?

Mr. Gordon Walker: Football pool winnings are drawn out of a pool that is heavily taxed already.

Mr. Nabarro: If the right hon. Gentleman is proposing a capital gains tax— and no doubt he has in mind the American method—it would be policy eventually to apply that tax to winnings on football pools or on sweepstakes and things of that kind as well as gains on the Stock Exchange.

Mr. Gordon Walker: The hon. Member is not entitled to assume that I would do it on the American basis if I had the doing of it. I would do it on a basis of capital transactions and a football pool is not a capital transaction.

Mr. Nabarro: The hon. Gentleman says, in a general and specious fashion, "a tax on capital gains" or a "capital transaction," as he calls it. Supposing a donor bought a diamond and sold that diamond a year later, would the right hon. Gentleman attempt to apply a capital gains tax to that?

Mr. Gordon Walker: I hope that the hon. Gentleman will reread the Report of the Royal Commission on the Taxation of Profits and Income, in which all these points are extremely well and completely answered. [Interruption.] In referring to the Report I am talking particularly about the tax on betting and on football pools. I go with the minority Report on the subject of Capital Gains.
What I have said is that, on the whole, we are not against, or not wholly

against, the changes in Surtax in Clause 12, but we are completely against those changes in Clause 12 that give relief up to £10,000 a year of income. This is an intolerable social injustice, and the more we think about it the more we dislike it. According to an Answer which the Chancellor gave me the other day, the cost of this Clause 12 concession will be about £25 million. It has only been made possible because of the charges imposed upon people in the course of the year by way of an increase in the cost of bread, milk, school meals and so forth. But for those increases, there would not have been a surplus with which to do it.
The Chancellor said that he could only just squeeze enough money out of his surplus to give this relief, but he would not have had the surplus out of which to squeeze it if he had not saved Government expenditure in the previous twelve months in the ways that I have described. [Interruption.] The Financial Secretary and his hon. Friends will refute these arguments if they can, but I do not think it can be done. We are particularly against extension of relief to Surtax payers on earnings between earnings of £4,000 and £10,000. No case has been made out for it, except the Chancellor's reference to the need to stop emigration. Perhaps the Chancellor has figures showing the number of people earning between £4,000 and £10,000 who have recently been emigrating.
I turn to one of the policy foundations underlying the Finance Bill, namely, monetary policy. We welcome the Chancellor's rather critical tone in his Budget speech about the monetary policy of his predecessors. There has been a change here. For his two predecessors, monetary policy was a near-magical mechanism by which the economy could be flexibly moved about. The Chancellor now talks about many factors having changed since the original monetary policy was worked out. He said in his Budget speech that the moneary machine was working under great difficulties, but although he is critical of monetary policy he is sticking to it. We have the curious result that, in recent years we have had Finance Acts resting upon monetary policy in which the Chancellors concerned believed, whilst now we have a Finance Bill resting on a monetary policy in which the Chancellor no longer believes.
The effects of high interest rates and a high Bank rate are as harmful as ever they were. There is still a very heavy charge on revenue for internal debt. There is a large loss across the exchanges in interest paid to overseas holders of sterling balances. This must, in the last three or four years, have imposed a very considerable drain upon our balance of payments. If we had not had a very high Bank Rate during this time we should now be in a very different position in regard to the sterling balances and our gold and dollar reserves.
I have seen no evidence that the high Bank Rate has had any very great effect on private investment. In so far as it has been affected, it has been by hire-purchase controls and to some extent by the credit squeeze. We are glad that the Radcliffe Committee has been set up; we hope that it will work with especial dispatch, and will hasten its report so as to have it ready for the next Labour Government.

Mr. Osborne: It will have plenty of time.

Mr. Gordon Walker: No. It will have to work very fast, indeed with unprecedented speed.
I come to the most difficult and what may be the most controversial contents of the Bill, namely Part IV, concerning overseas trading corporations. It is a very radical departure from established British fiscal practice. This part of the Bill is exceedingly complicated, although the issues are relatively simple. When we come to the drafting of Amendments it will be very hard indeed to do so. It may therefore be easier if I start by saying what our attitude is in general on this matter, and then deal with criticisms of the Government's proposals. We are certainly in favour of tax concessions to pioneer companies. Double taxation arrangements frustrate the attempt by a Colony to give relief to a pioneer company. The lower the local tax goes the higher the United Kingdom tax goes. That is why we put down an Amendment last year to secure changes in that respect. We are in favour of these proposals, in so far as they give concessions to pioneer companies.
We think that there is a case for helping United Kingdom-based companies that operate overseas. This practice has spread very far, and is widespread in

other countries with which our companies are competing. The other countries have similar tax concessions. We favour the general principle that it should be the trading and not the investment income of the overseas trading corporation that should be relieved, and that the benefit of the concession should go to the company and not to the shareholders. In the light of these views, we are inclined to think that the proposals of the Bill go too far and that there are major defects in them.
One of the defects is that the overseas trading corporation is to be free of Profits Tax as well as of Income Tax. This is against the recommendation of the Royal Commission in paragraph 691. The Royal Commission only came down in favour of overseas trading corporations by a very narrow majority. It was against remitting Profits Tax to overseas trade corporations because it would benefit the shareholder in the overseas trading corporation against the shareholder in the normal British company.

Mr. Remnant: Am I not right in assuming that the profits, if distributed ii this country, are subject to Profits Tax?

Mr. Gordon Walker: No, I think not. I do not think that the profits, if distributed, are so subject; but those are matters that we have to work out. My reading of the Bill is that those profits are subject not to Profits Tax but to Income Tax Reading of this Part of the Bill is very difficult.

Mr. J. T. Price: I have been trying to follow the argument of my right hon. Friend but it is becoming deeper and deeper. My right hon. Friend says, from this side of the House, that profits obtained by overseas trading operations shall remain with the company and not be given to the shareholders. I do not follow that argument. Surely the shareholders hold the equity in the company and whether the profits are distributed or not they will have the advantage of the increased capital value?

Mr. Gordon Walker: I did not say any such thing. I said that tax exemption on these profits should benefit the company but that if the profits were distributed to the shareholders they should be subject to Profits Tax, as the Royal Commission says.
Another great doubt that we have is that the main benefit of the proposals will be to the Surtax-paying shareholders. That has been said by the Financial Times and the Economist, which have studied this part of the Bill with great care. The Surtax-paying shareholder is primarily interested in capital appreciation, and will benefit particularly on the winding up of an overseas trading corporation, as is shown in the Sixth Schedule. That is very disturbing. In effect it will do what the Government say they do not want to do, namely, allow the distribution of tax-exempted profits.
The Surtax-paying shareholder will benefit on the winding up of a corporation. He will get his tax-free capital repayment, and a distribution of the further capital of the oversea trading corporation which has been built up because of tax exemption. He gets this further distribution of capital, Profits Tax-free and Surtax-free. The Chancellor has set up a great interest which will make for the winding up and re-formation of overseas corporations —

Mr. A. E, Cooper: Companies are not usually formed for the express purpose of winding them up.

Mr. Gordon Walker: There is now an incentive in favour of winding-up a company which has never existed before under our tax law, and which gives an enormous new benefit. I would ask the hon. Gentleman to study the Sixth Schedule. This is something which we must remedy.
We are not sure about the good sense and the wisdom of the exemption of exports as distinct from mining, oil winning, plantations, etc. If profits on exports will be tax exempt, this exemption will erode the basis of taxation even more. We now know that the basis is much too narrow. If a large proportion of the profits earned by exports are exempt this will involve opening the way to massive tax avoidance. It will be extremely hard to enforce Clause 21, which deals with purchase free on board, or Clause 28, which tries to insist upon trading at arms' length between companies that are not at arms' length. It will be difficult to enforce these Clauses.
The Chancellor has created a powerful incentive for people to find a way to

transfer some of the tax-free profits of the oversea subsidiaries to the parent company in the United Kingdom. There is an enormous incentive to do that, and ways are no doubt being worked out now to evade the safeguards, some of which have been published.
The Sixth Schedule is one of the things upon which the Chancellor relies. This treats a loan from an oversea subsidiary to its parent company as a dividend. There are various forms of evasion, including indirect loans. As the Financial Times has already pointed out, there is nothing in the Bill to stop two parent companies here from making arrangements by which subsidiaries will make loans, not to their own parent company but to the other parent company, and vice versa. The Chancellor has invited our co-operation to make Part IV as clear and watertight as possible. He has been warned about this loophole. It must be stopped because otherwise the cost of these concessions may mount.
I have grave doubts whether the cost will not be much more than the estimated £35 million a year. If these evasions are not stopped they will also cause the erosion of our foreign-exchange earnings, to which the Financial Secretary has referred.
That brings me to my major doubt on this matter. It is certainly possible to overstimulate overseas investment. A balance must be kept. The arguments on this have been very well set out in the Report of the Royal Commission. We must not forget that the prime economic need is productive home investment. If we do not have that, everything else goes. If we have too much overseas investment it must be at the expense of home investment. There is a great deal of evidence that overseas investment is now, in spite of what everyone is saying, running at about as high a level as we can afford.
So far as I can make out, in the years 1953 to 1956 overseas investment was, on an average, about £200 million a year, which was more than twice the balance of payment surplus on current account. That means that we were investing overseas a great deal more than we were earning. The difference was accounted for by sterling balances going down and by movements of the reserves, but the direct earnings of the country were not enough to cover overseas investment in those last


three years. The amount that we are earning on current balances in our balance of payments must set some limit to the amount of overseas investment that we can make in any particular period.
If in those circumstances overseas investment is too far increased, it will give us a very grave balance of payments problem because an increase in overseas investment reduces the foreign exchange available to buy imports. It is true that overseas investment, in the long run, draws exports after it, but in the short run the strain can be very grave. I hope that the Chancellor will give us some arguments on this subject. We are worried about the short-run strain, especially with our very depleted resources. Even the long-term effects can be grave if home investment is falling, because home investment is the source of all our future output.
In consequence of this we think that these reliefs are somewhat too large and too indiscriminate. We should like two main types of change made, which we shall try to secure. One is that the reliefs to overseas trading corporations should be scaled down and differentiated. We certainly want pioneer industries to get full relief, but f do not see why others should not get a percentage remission of their Income Tax—not 100 per cent.— exemption. There is a lot to be said for discrimination in favour of operations in the Commonwealth. The United States discriminates according to the area in which what are in effect its overseas corporations are trading. It gives different rates of relief to corporations trading in the Western hemisphere, those in the Far East and those in United States possessions. It is a workable thing—not something which has been thought up out of thin air.
There is also a case for discrimination in favour of overseas trading corporations which produce goods we import, such as in mining, oil winning and plantations. That would have the least grave effect on our balance of payments if we were getting a cheaper flow of imports against the investments we are exporting.
The second main change that we should like is that if this overseas trading corporation scheme is to be put through there should be more encouragement for home investment. The provisions in respect of overseas trading corporations

in Part IV of the Bill greatly strengthen the argument for investment allowances. We need some counter-pull of investment back to the home economy, particularly if we can make it a little discriminatory, as a balance against too much of a pull into overseas investment.
Many of our doubts about this Part of the Bill are because we are not at all convinced that the Chancellor has fully thought out the effect and impact on our balance of payments, etc. We think that he may be running unpredictable risks with the national economy.
In general, we have very grave doubts, therefore, about many features of the Bill. Some provisions we welcome. Even some which we welcome we shall want to alter and amend. We want to submit the Bill to a searching, arduous and largely critical scrutiny, and we hope that the Chancellor will provide adequate time for that. Otherwise, there can be no alternative to very prolonged sittings, which we for our part want to avoid. We are determined to do our utmost to improve and alter a Finance Bill which, in our view, has not been properly thought out and balanced, which has very grave omissions that we want to remedy, and which contains some proposals and provisions which are grossly unjust and reactionary.

4.50 p.m.

Sir Alexander Spearman: The right hon. Member for Smethwick (Mr. Gordon Walker) has given us, as he always does, a very thoughtful, interesting and, on the whole, a very fair speech, but if his criticism is the full measure of the criticism of this Finance Bill, I do not think that my right hon. Friend the Chancellor has very much cause for anxiety. That may be less of a reflection on the debating powers of the right hon. Member than a tribute to the Chancellor.
I think that the weight of the criticisms up to date in the Budget debates has been on the selection of the recipients whom the Chancellor has chosen for such remissions for taxation as he has found possible to give. I wonder whether that is really the right test of a Finance Bill, I believe the way in which my right hon. Friend's first Budget will be judged in future is in relation to its effect on the economy.
Much has been said about old-age pensioners. There is no section of the community with which most of us, on both sides of the House, feel more sympathy. It is true that they are now better off than they were at any time under a Socialist Government, but it is also true that we should all like to see them better off and that their improvement has not been anything like in proportion to the improvement in wages. If this Bill encouraged greater production to take place in the country it would be possible to pay increases in those pensions without those increases being almost immediately offset by rises in prices.
This Government and its predecessor, the Socialist Government, were continually criticised and are criticised for rises in the cost of living. I am quite sure they would be criticised if there were any measure of unemployment. What does not always seem to be remembered is that never in this country, under any Government, nor, I think, in any free society, have we had both stable prices and full employment. I think that we got nearer to it in 1954 than ever before, and we might perhaps have achieved it in 1956 but for the consequences of Suez.
It is quite easy to have full employment and stable prices if we have direction of labour and the State decreeing the rate of wages, but that is not what we call a free society. It is easy to have full employment and rising prices, as we know from experience of the last ten years. It is easy to have stable prices at the cost of heavy unemployment, as we know from experience of the pre-war years. The problem of the Government is to see how we can get both full employment and stable prices in a free society. Clearly, we can only get a check to the rise in the cost of living if increases in spending do not exceed increases in production. Otherwise the demand for goods will be so much in excess of supply that employers will readily give way to wage claims because they will know that they can put the extra cost on to the price of goods.
On the other hand, if we are to maintain full employment there must be an increase in spending roughly equal to the increase in production. In other words, total money incomes must roughly balance national resources. Those are

two legs which have to be equal. If we are to have full employment, somehow or other we have to get those legs equal by extending the short leg of production rather than by contracting supplies, that is, shortening the long leg.
That means that the economy has to run at a very high speed. The right hon. Member for Huyton (Mr. H. Wilson) referred to this Budget as an "assignment with inflation." Last year total consumption was about £14,000 million. How the right hon. Member or anyone who has not got access to official information can really judge so exactly as to know whether £50 million more or less out of the total of £14,000 million is going to be inflationary, I cannot understand.
My right hon. Friend has the advantage of very able advisers, and I know he is more qualified than most to interpret that advice. I am very much prepared to accept the view that he can judge these things and make a correct assessment on all foreseeable circumstances, but he may have to deal with quite unforeseeable circumstances. All sorts of things might happen which are quite outside his control. Therefore, he must have proper brakes. When the economy was running, like a motor car, at 20 m.p.h. one did not need much in the way of brakes, but when it is running like a car at 100 m.p.h. very efficient brakes are required. My right hon. Friend has often been with me when I have been driving a motor car. I know he has such confidence in my driving that he does not in the least mind my driving fast, but I have seen a certain look of comfort on his face when he has known that I have good brakes on my car.
Does this Bill provide those brakes? Largely speaking, I think that the brakes are monetary and fiscal. The right hon. Member for Smethwick did not think very much of the monetary weapon. I do not think he was justified in suggesting that the Government do not. If he had read or listened to the speech of the Economic Secretary, he would have noted that great stress was there laid on the monetary weapon.

Mr. Gordon Walker: I listened to the speech of the Chancellor.

Sir A. Spearman: I am glad that the right hon. Member will be listening to another speech from the Chancellor tonight and may have the lesson rubbed in once more.
The monetary weapon takes a long time to work. I think that my right hon. Friend the Home Secretary knew that to his cost in 1955, because it took much longer, under the world conditions of 1955, to work than it did under the quite different world conditions of three years earlier. For that reason, whatever he may do about the short term, I hope that my right hon. Friend will be very slow to do anything which will enable long-term borrowing to take place at materially lower rates. Indeed, I would commend to him the advice of the leading article in the Economist last week.
In reply to the right hon. Member for Smethwick, I would say that the monetary weapon played a very big part in the improvement in balance of payments last year, the improvement in exports, in savings, and in the effect on stocks, but I think it is only effective in co-operation with the fiscal weapon. It seems to me that our fiscal weapons are getting a little rusted up.
I understand that it is very difficult, without greatest unfairness, to alter Income Tax in mid-year owing to the P.A.Y.E. arrangements. I very much hope that in the course of the next two Budgets which my right hon. Friend will be introducing he will be able to make material reductions in Income Tax. It seems to me that he could make those reductions much more safely, and it would be much more easy to make them, if he knew that at short notice he could temporarily raise those taxes. As I said, brakes were not necessary when the economy was running very slowly, and they would not be necessary if we could predict the future quite clearly. I should like to think that the Chancellor had the power at any time, not waiting for the end of the financial year, to alter the rate of Income Tax either way.
I turn next to Purchase Tax, which seems to me to be a very cumbrous weapon. It is very difficult to alter it in mid-year or even at the annual Budget, and great dislocation and hardship are caused to traders when alterations are made. I want to ask my right hon. Friend

very seriously to consider whether he could not substitute for the Purchase Tax a sales tax which would be ranged over such a variety of articles that quite a small alteration, say of 2½ per cent., would be enough to make a big difference in the release or contraction of purchasing power. That would provide him with a much more flexible weapon.

Mr. Donald Chapman: Is not one of the great difficulties the fact that it would mean a lower tax on articles we wanted to export, thus sucking them into the home market? It would, for instance, mean a considerable reduction in the rate of Purchase Tax on motor cars, which would be a direct incentive to flooding them into the home market.

Sir A. Spearman: I think there may be a case for having two ranges of tax, one for certain luxury articles, which would be limited to a small range. The point that I want to make, however, is, I think, much more important than that made by the hon. Member; it is that a sales tax would provide a flexible weapon which could easily be altered.
I suggest to my hon. Friend that if he cannot provide himself with instruments which are effective, he may well find that through unforeseeable events he is forced to revert to a system of controls. Hon. Members opposite often tell us that controls are a panacea for all difficulties and that there is something magical about them, but they do not often tell us what controls they would suggest and what the consequences of those controls would be. If they mean controls of imports, I agree that as an emergency measure that might serve a purpose for a time, but unless it is accompanied by a drastic cutting down of consumption at home it can lead only to still more inflation, and I should have thought that it led, too, to a great risk of retaliation, thereby affecting our exports.
If the controls are to be on what is produced, that, of course, assumes an infallibility by Whitehall about what the country wants to buy; and no Government have ever succeeded in being infallible in that direction. Such controls are all right in war time or possibly under a Socialist Government, where we should have rationing; because by rationing the Government can force the consumer to


buy not what he wants but what the Government choose that he should buy. It is not always remembered that with every Socialist Government which has had a clear majority there has been widespread rationing.
The third form of control might be the allocation of raw materials to manufacturers. It has always been found that that benefits the sluggard who is not extending his business but who can pile up valuable stocks, and that it damages the enterprising firms who are going ahead. To my mind, therefore, any of these controls, except as an entirely temporary emergency measure, are not a healthy readjustment before a leap forward, but a disastrous distortion which would impoverish the country.
My first point is that if the economy is to run at this high speed, which I think is necessary to maintain full employment, my right hon. Friend must see that he has the instruments with which to check it. My second argument, which is very much shorter, and which is the last point I shall make, concerns investment. I think we all agree, in all parties, that if factories are sufficiently re-equipped and improved with labour-saving devices, and if the workers accept those labour-saving devices, then there can be increases in wages without danger of inflation, and our prospects of selling abroad are much improved.
That investment, however, depends not only on the enterprise of manufacturers and the acquiescence of workers. It also depends on the savings being available. A very large part of the savings today are provided by company profits. That is one very good reason why we on this side of the House welcome increases in profits, because it enables investment to take place which would not otherwise take place.
Formerly it was largely the rich who did the saving which provided the investment. Owing to the redistribution of wealth, that is impossible today. If we take all the incomes of £2,000 a year after tax and add them together they amount to £370 million. If half of that were invested it would not make a very great deal of difference. All the incomes under £1,000 a year, on the other hand, amount to £8,000 million. Clearly, any

increase in savings must come from the people with small incomes.
The well-to-do largely buy today not Government stocks but equities, which I think is a very logical thing to do. After all, it is only if the industry of this country expands that we as a nation will survive. It is almost impossible for the small investor to do that, however, because of the complications, because of the difficulties, because he does not know what to buy, and because he cannot afford to buy good advice. I feel that if the small investor were given an opportunity to buy the kind of equities which the rich man buys, it might be a great stimulus to saving, it would be very beneficial to the country, and it would bring a great element of stability. After all, where a man's treasure is, his heart may be attracted.
I wonder whether my right hon. Friend can do something to promote this. Perhaps some of the large industrial companies, some of the banks, or other very responsible financial institutions, might set up machinery, perhaps a unit trust, to achieve this, but under present conditions they could not offer terms which would attract the small investor. In order to do that, my right hon. Friend would have to give some help.
This is not the occasion to elaborate the suggestion in detail, but I ask my right hon. Friend whether he will consult his advisers to see whether something can be done in this direction, because it might have an important effect on savings and thereby enable greater investment to take place. By investment, I mean investment in factories and equipment.
We all want a high standard of living and we all want high production. Most of us agree that to get these we have to have high investment, and I believe that high earnings and high profits are not incompatible with, but are essential to, those other factors. It is because I believe that this Finance Bill goes some way to promote all those five "highs" that I warmly congratulate my right hon. Friend.

5.10 p.m.

Mr. H. Rhodes: I find the Finance Bill quite interesting, but before I say why I find it interesting I should congratulate the Chancellor on having relieved the amateur


dramatic and opera societies throughout the country of their obligation to pay tax if they pay a conductor or an orchestra. To that extent, at any rate, he has sweetened life a bit in our part of the country, and I thank him very much for it. I also liked the way in which the right hon. Gentleman shaped when he delivered his first Budget speech.
After saying that, may L address a question to him? We have heard of the possibility of claiming the investment allowance twice on ships, a point to which the Financial Secretary referred. Will he tell me how that provision applies to the case which I shall now quote? There was a report in the Manchester Guardian on 24th April commenting on a deal which had been put through about a ship. The report read:
 A deal concluded recently concerns an 18,000-ton turbine tanker which should be ready for sea next month. The party who originally ordered this ship will pay the German yard building it 4 million dollars in all, but instead of trading it himself he has sold the ship to United States buyers for the contract price plus a ' premium' of 950,000 dollars—a not uninteresting speculation!
Will the Chancellor ask the Treasury to inquire into transactions of this sort which may be taking place in this country at present?
I look at the Bill from the position of a manufacturer in the wool industry who, over the years, has put the profit back into the business which has been made in the hope of making an economic unit which will stand on its own feet in all sorts of weather. Despite the remarks of the Financial Secretary that in some part there was assistance to British industry in the Bill, I want to ask the Chancellor where the assistance is to be found in the Bill. I can see the assistance to the shipping industry, and I do not disagree with it, but the position in our industry is different. Last year, our investment allowance was suddenly cut off. This year, we see another 20 per cent, put on to an industry like the shipping industry. This makes us wonder who is valuable to the community and who is not.
There is a premium today on "know-how." The reason for this 40 per cent, being put on the investment allowances for shipowners at this time is the danger to the country of shipping "know-how" being transferred overseas. I understand the position to be that if a company in this country starts a new venture in

Bermuda it only needs to start a £100 company to attract backing to the hilt— to get as many millions as it wants from the New York bankers in order to buy ships. I quite understand that one cannot just sail ships out of British ports under another flag. On the other hand, it is possible, by the funds which become available to it, for a small company formed in Bermuda to be able to buy the assets of a company operating ships in this country, and transfer them in that way.
What benefit will the nation get? I have been looking at this matter ever since the Budget speech to see how it affects the livelihood of my own industry or others looking forward with apprehension to the competitive atmosphere of the Free Trade Area. It is very interesting to see how the shipping industry measures up to this. I have been looking at the cost of freightages. We in this country are at a very grave disadvantage in this compared with European neighbours. I will just read one or two illustrations, and will begin with the commodity in which I am interested.
The figures show that the total cost per ton for either wool or cotton landed in Liverpool is about 17s. In Manchester, it is 20s. per ton, and in London it is 26s. per ton. In Rotterdam, American cotton can be landed and stowed in sheds for 4s. 6d. per ton. In Rotterdam, Australian wool can be landed at 12s. 6d. per ton. Coal coming from the Hampton Roads to the Continent can be snipped and landed there at 82s. 6d. per ton, compared with a United Kingdom figure of 90s. to 91s. 6d. per ton. Wheat is 89s. on the Continent, and 105s. in the United Kingdom. The list is very long but, with the exception of, I believe, sugar, which is a very good cargo for unloading, in every case that list shows that we are at a disadvantage to quite a considerable amount per ton.
That is probably due to a variety of causes and mainly, I understand, to out-of-date equipment on the docks. If that is the case, and if we in this House really are sincere about doing something to increase the efficiency of a particular industry, I think that we should also take into consideration what contribution that industry will make to the general good.
The comments made about the arrangements for overseas trading need to be


elaborated a little more. For instance, I should like to know what would be the position of a company starting a branch in, say, the south of Italy as a British company, commencing partly processed manufactures to sell in other parts of the European Free Trade Area. Does the principle apply to the European Free Trade Area, or is the idea that it should be confined to British possessions or Colonial Territories, as I have seen suggested in some newspapers?
I know that my next is a Committee point, but may I just put it to the Chancellor in the hope that I may persuade him to include wool fabrics sold over the counter in the exemptions from Purchase Tax? It is becoming an ingrained complaint with us in the wool industry that this burden should be put on us especially when we have such a good record in exporting to dollar areas. In 1956, our earnings exceeded 112 million dollars. There was no other manufacturing industry which could compare with ours. In the last three years our exports not only to America, but to other parts of the world, have gone up; and not just exports by value, but increased exports by yardage.
I do not want to waste time going over old ground, nor do I want to waste the time of the Chancellor in advancing arguments which have already been far better put to him by representatives of the trade. I refer to the difficulty of administering sales to non-registered firms. Let us pass that, and go on to the arguments which have been adduced at various times by Board of Trade and Treasury spokesmen to the effect that the amount of trade in woollen goods sold over the counter is negligible; that it is so unimportant as not to be worth bothering about.
During the last few months, the wool trade has made very exhaustive inquiries into the amount of woollen goods sold over the counter in large departmental stores. I can assure the Chancellor that 25 per cent, of the fabrics sold over the counter in such stores are of wool, and I would ask him to look at that matter again and to free us from this incubus. We feel that we are very unfairly treated. It is not often that the industry argues for anything at all with the Chancellor. We keep out of his

way—we are very quiet and industrious —but on this occasion, on behalf of the industry, I am asking him to get rid of this discriminating tax, and so help us to do even better during the next few years than we have done in the last three.

5.25 p.m.

Mr. Alan McKibbin: Many people will be glad that my right hon. Friend the Chancellor of the Exchequer has done something to encourage the entertainment of the people by abolishing taxes on the living theatre and on all sports, and by reducing taxes on the cinemas—all of which will doubtless involve the Treasury in a considerable loss. May I strike a musical note and make a suggestion, the cost of which would, I believe, be infinitesimal in comparison?
I am asking for the abolition of the 60 per cent. Purchase Tax on musical instruments used by amateur bands. In support of this plea, I should like to quote from a letter sent to me by the honorary secretary of the North of Ireland Bands' Association, as he can state the case much better than I can. He says:
 Musicians in Northern Ireland are steadily becoming more apprehensive about the adverse effects of Purchase Tax on musical instruments, musical education and performance.
Although all classes are involved, I am particularly anxious about the future of bands, which, as you may know, constitute a most economical form of musical culture in this country. This tax is slowly but surely forcing many of our bands out of existence. Furthermore, it is preventing new bands being formed by many of our youth organisations, owing to the prohibitive cost of instruments. Second hand instruments, too. are now almost unobtainable.
I would also like to stress the important social value of bands, especially in the small towns and villages throughout the country. The deprivation of this form of social education will have a serious effect on the future of our youth.
This may probably apply in Great Britain, also, but I have no knowledge of that.
On receipt of this information, I visited a leading shop which supplies instruments to bands. The prices quoted staggered me, as I am sure they will stagger other hon. Members who, like myself, may have very little knowledge of this subject. Good quality Boehm-system flutes, which


are used by the best bands, cost £100 to £170. That is for a single flute, which certainly makes a "toot" very expensive. Flute bands, in particular, are very popular with us, because of the sad fate which befell a flute that was burned at the stake in days gone by, and which is part of the mythology of my country.
A few other items quoted were, side drums, from £15 to £25; base drums, from £20 to £36; cornets, from £31 to £46; horns, from £54 to £81; and bagpipes, from £20 up to any price. The prices of euphoniums ranged from £86 to £138, and I asked the man in the shop what a euphonium was. [An HON. MEMBER: "There is a very good answer."] The man is the shop said he had been told that it was the brass band's revenge on the bagpipes. All these prices, of course, include 60 per cent. Purchase Tax, but they show the heavy cost of fitting up a band.
Most of these bands on whose behalf I am appealing make no charges whatever, except on very special occasions, and they do a lot to assist charities, because the money which they raise is given by the performers, though in some cases they are assisted by the public, and, no doubt, their Members of Parliament. On top of all this, a band also has to provide its own uniforms, on which there is Purchase Tax. Surely these people who just play for the love of it, and the pleasure that it gives to others, ought to be encouraged.
I sincerely hope that my right hon. Friend will give favourable consideration to my plea, and that he will not have it on his conscience that these beautiful bands will, in the words of an old Irish ballad:
 Be doomed to a fate that's pathetic.

5.32 p.m.

Mr. Victor Yates (Birmingham, Lady-wood): I find myself in agreement with the hon. Member for Belfast, East (Mr. McKibbin). He has made a very interesting case against Purchase Tax on musical instruments, which, I think, also raises the question of what is a luxury and what is a necessity.
To follow up his argument a little further, I would say that the whole question of principle on the Purchase Tax is, in my judgment, wrong, and I should have thought that something could have been done before now to get rid of this very

pernicious tax. Certainly, in my judgment, music is a necessity, as is all culture, and for that reason I hope that the Chancellor will take due notice of the case which the hon. Gentleman has made.
I rise only to mention one special aspect of expenditure. Earlier in the debate, an hon. Member was saying that this Budget would be judged by its effect on the economy, and I think that it is important that the effect of this Finance Bill upon the economy of the country should be realised. The hon. Member was saying that, of course, there were lots of things we should like to do for the old-age pensioners, but I gather that his intention was that if we were to do anything more for the old-age pensioners it would have an adverse effect on the economy.
I object to the Bill, because, for example, it does not provide the justice for the old-age pensioners to which they are now entitled. My right hon. Friend the Member for Smethwick (Mr. Gordon Walker) made an excellent case against many aspects of the Bill, and mentioned the unwillingness of the Government even to give relief to the old-age pensioners in the matter of television licences. That is disappointing. On the other hand, I am asked to agree to a Bill which raises £5,000 million and to agree that a large and important proportion of that money should go for purposes with which I am completely in disagreement.
Now I wish to refer to the effect of the cost of defence upon the economy of the country. Why should we have Income Tax at 8s. 6d. in the £? I am in favour, of course, of Income Tax and other rates and taxes if it can be shown to me that they are really necessary, but we are to have these taxes and to continue with these taxes and use the money, or a very large proportion of it, for purposes from which, to date, we can see no likelihood of real, economic results.
The amount of money which we are asked to provide for defence from the money that is to be raised by taxation is £1,420 million. The House has congratulated itself on having got the cost of defence down to £1,420 million, and it does not look to me as if, even in the hydrogen bomb age, we are going to do very much to reduce the enormous burden of nearly £4 million per day for defence.
I have been inquiring into the amount of money which this country has spent in the last twelve years. The question has been asked from this side of the House what value we got for the £7,000 million spent in the last five or six years, but in the last twelve years the amount which we have allocated to defence has totalled £14,443 million.
If hon. Members opposite want reductions in taxation, and they are prepared to ignore that kind of expenditure, it seems to me that there is no possible hope of the tax burden on the British public being reduced. If, by using this money, we were being asked to provide new and better hospitals, or better education services and universities, then I should be much more pleased to approve this expenditure, or if we were prepared to care for our old folks better than we do today, and I do not mean merely by cash payments to old-age pensioners.
There are far too many old people today in mental hospitals. There are far too many lonely old people who need to be cared for in smaller institutions and in homes. I recently visited the accident hospital, in Birmingham, which has a world-wide repute, and I discovered that in the 200 beds there, the vast majority of the people occupying them were women over the ages of 70 or 80—[An HON. MEMBER: "Accidents in the home."] Yes, accidents in the home, as my hon. Friend says, and they are obliged to take these people there, because if they did not take them to hospital they would die. Even when they do take them into hospital, the authorities find it very difficult to provide a home for them.
Yet we could have a new accident hospital for a small fraction of the amount of money we are asked to approve today. This hospital is a disgrace to our modern standards, in spite of the wonderful work that is done there. When one goes into that hospital, one sees all kinds of accident cases, perhaps three or four different kinds of accidents being dealt with in one cubicle, with a curtain drawn round one after the other, and with no adequate accommodation for dealing with the patients at all. If we go into the mental hospitals, we find similar stories of overcrowding, of staff difficulties, as well as a lack of finance for what we consider to be an important aspect of welfare.
I am opposed to a continuation of this warfare State, which, up to the moment, has produced only fear and tension. It is an attempt, to use the words which I think the Prime Minister used some time ago, to chain the passions of mankind by fear; and, certainly, we can see fear, with all its evil consequences. I am bound to say that there are hon. Members on both sides of this House who seem to be quite complacent about this enormous expenditure. We say that we will abolish conscription in four years. After many arguments by my hon. Friends on this side of the House during the past twelve years, it is now realised that National Service is wasteful, but, of course, it has been wasteful throughout all these years, and if it is wasteful, why should we continue it for another four years?
The latest figure given by the right hon. Member for Carshalton (Mr. Head), when he was Minister of Defence, of the cost of maintaining, equipping and training a National Service man during his two years of Army service was £740. What could the citizens of this country do with £740 if they could be assured of that sum for the education of their children? If it is true, therefore, that this money has been wasted, why must I agree to a Finance Bill which is raising, by direct and indirect taxation, money for the purpose of continuing conscription for another four years?
I understand, again from the latest information available, that it costs £45,000 to train a bomber or a fighter pilot. That is the information which we have had given to us in this House in answers to Questions to Ministers. If I could have a sum representing what we spend on defence in six hours, I could turn the City of Birmingham into a vastly different place; and if similar amounts were allocated to them, the other cities would do the same.
I therefore object to this Bill not only because of some of the injustices which it contains, but because the money which it raises is not to be used for purposes which I believe would make for the welfare of the people and the peace of the world. Apart from the objection which the hon. Member for Belfast, East raised about Purchase Tax on musical instruments, I also object to the high rate of Purchase Tax on jewellery. This affects


the City of Birmingham, and the jewellery quarter of industrial Birmingham is in my constituency.
This industry has lost considerable numbers of skilled men in the past few years because of the tax burden imposed on employers who are trying to carry on an industry which has been regarded as a luxury industry, whereas, in fact, it has contributed a great deal to the culture of the country, and has contributed a very great deal, and could do a great deal more, to exports and the improvement of international trade.
Apparently, we are to have this money for the training of Service men and bomber crews and the stockpiling of atom and hydrogen bombs, but we cannot have reasonable consideration for the workers in these industries who are labouring under difficulties. We cannot have elementary justice for the old-age pensioner. It is a crying disgrace that the position of our old-age pensioners is today so difficult. There is not one hon. Member of the House who can deny that it is grossly unfair and unjust to continue with our financial arrangements, ignoring over and over again the claims of the old-age pensioner and, at the same time, saying nothing about the £1,420 million for defence this year and the £14,000 million in the past twelve years.
What have we achieved by all this? It is time that the House began to take an entirely different view. Public opinion in this country and in the world will eventually compel us, as representatives of the people, to look at this matter from the point of view of the people and the peace of the world and make a real contribution by reducing the burden of this wasteful, destructive defence expenditure in favour of something more humane and better for civilisation.

5.47 p.m.

Mr. Donald Wade: I do not propose to make a lengthy intervention, partly out of consideration for other hon. Members who wish to take part and partly because it is the intention of my hon. Friends and myself to table about 20 Amendments to the Bill.

Mr. George Thomas: That is fair warning.

Mr. Wade: We shall do so in the hope that they will be accepted, but also with the object of indicating some of the reforms which, we think, the Chancellor might have introduced this year without any undue strain on the economy.
The Bill, as the right hon. Gentleman the Member for Smethwick (Mr. Gordon Walker) pointed out, has one characteristic in common with most Finance Bills in that it is difficult to follow some of the wording and difficult to extract the meaning from the words in the Bill. Over a period of years, these Finance Bills have built up a language of their own which is understood only by the few who are initiated into their mysteries, and I find some Clauses difficult to follow.
I have read some of the Clauses a number of times. I have puzzled over Clause 12, particularly the first paragraph. I am not sure whether it expresses what is intended as clearly as it might do, but if, at the appropriate time, the Chancellor or the Financial or Economic Secretary will get up and say that the Clause is a model of clarity and that the gram mar is unimpeachable—

Mr, G. Thomas: Impeccable.

Mr. Wade: Impeccable, I think I should say—I will accept his assurance. I do not want to be finicky about the wording at this stage.

Mr. Arthur Moyle: I have read Clause 12 carefully and find, with regret, that both the manual worker and the old-age pensioner are entirely outside the reliefs which it proposes.

Mr. Wade: Perhaps we might consider that in Committee.
Even if the wording is somewhat obscure, the effect of some of the Clauses on various classes of Income Tax and Surtax payers is quite clear. Some receive no benefit at all, others derive some benefit and yet others derive considerable benefit. If my calculations are correct, those in the higher Surtax levels will derive the most substantial benefits.
We have to consider calmly and dispassionately whether that apportionment of reliefs will achieve the objects that are most needed today, including the


aim, mentioned by the Chancellor in his Budget speech, of providing
 additional incentives to those whose efforts are of particular importance to the expansion of the economy."—[OFFICIAL REPORT. 9th April. 1957; Vol. 568, c. 1000.]
It may well be, and I do not deny, that there are some in these higher Surtax levels whose efforts are of particular importance to the expansion of the economy, but I should have thought that there were a great many in the lower levels— the technicians, the younger administrators and the kind of men and women who, during the last few years, have been tending to go overseas.
I should have thought that, in the main, they came in the £ 1,000–£2,500 category. I do not object to a reform of Surtax provisions—I realise very well that reform has been long overdue and that the commencement of Surtax at the £2,000 level has been difficult to justify owing to the changes in the value of money; but I question the degree of benefit granted to those in the £4,000–£ 10,000 Surtax level.
The numbers affected have some bearing on the point which I am putting forward. According to the National Blue Book for 1956, those in the £l,000–£2,000 bracket total 1,115,000, those in the £2,000–£5,000 bracket total 274,000, and those in the £5,000–£ 10,000 bracket—I do not have the figures from £4,000–£10,000—number 48,000. It is unlikely that very many of the technicians and experts whom we need in industry today will be found among that 48,000, which is a very small number out of the total population of 50 million.
I am not arguing in favour of "soaking the rich"—I think we have done enough "soaking the rich"—but I am concerned with priorities. This is important, because we have to consider alternative reliefs that might have been possible had the Chancellor had a little more to spare and had he decided to make these reliefs, say, up to the £4,000 or £5,000 limit.
I will take just one example, that of apprentices. Obviously, one could take the case of the old-age pensioners. There is a very strong case indeed for them, but they require a debate on their own. I prefer this afternoon to deal with changes in Income Tax and I put forward the case of the apprentices by way of illustration.
Under Clause 10 (3) of the Bill, the child relief is to be increased. That is a wise and proper course for the Chancellor to adopt, but I should like to pursue the point a little further. If a father sends his child to a university, the child may get a State scholarship or local authority grant which may be worth as much as £300 or £350 a year. I think I am right in saying that, in those circumstances, the father will still get the whole of the increased child relief under the Bill. If, on the other hand, that boy or girl became an apprentice and were given, say, £2 a week pocket money, the father would lose the whole of the child relief.

Mr. Douglas Houghton: If it were a return of premium, it would not count; otherwise, it would.

Mr. Wade: I appreciate the point about the return of premium, but I think that my general principle is correct, that if the child received a certain amount of pocket money, which is not unreasonable, the father would lose the whole of the child relief. That is not an encouragement to advising or allowing children to become apprentices. The time has arrived when something should be done to remedy that position and it might well have been done in this Bill.
I suggest that in considering the Bill one should have four aims: first, the granting of greater incentives to key men in industry; secondly, the encouragement of personal saving as opposed to compulsory State saving; thirdly, a wider distribution of ownership; and, fourthly, the encouragement of new enterprises.
I should like to say a word about saving. It may be contended that if greater reliefs are granted to those in the higher Surtax level, they will tend to save the additional income which they retain. It may be true of some, but not of all. Some will spend this additional money on bigger and better motor cars, whilst others will put it on one side and save it and increase the total savings, but it is clear from the numbers of persons involved that we cannot possibly get the additional saving that is required from those in the higher Surtax level. The hon. Member for Scarborough and Whitby (Sir A. Spearman) made that point in his speech earlier this afternoon.
There are many ways in which saving might be encouraged and I was interested


in the observations made by the hon. Member for Scarborough and Whitby.

Notice taken that 40 Members were not present:

House counted, and, 40 Members being present—

Mr. Wade: There are many ways —

Mrs. Jean Mann: On a point of order. I do not think there is a quorum in the House, Mr. Deputy-Speaker.

Mr. Deputy-Speaker (Sir Charles MacAndrew): There was two minutes ago, so we cannot have a count for a while yet.

Mr. Wade: There are many ways in which one can encourage savings and I should like to turn the attention of the House to one method which has not received sufficient consideration. One of the reasons why my hon. Friends and myself have for many years advocated the sharing of ownership in industry is because it tends to encourage saving as opposed to spending.
Unfortunately, one of the consequences of our system of taxation is that the payment of cash bonuses is encouraged, as opposed to the issuing of shares. That may not be the intention of the Treasury, but it is one of the indirect effects of our system of taxation at present. If a firm wishes to introduce a form of co-partnership scheme, which involves only the sharing of profit and some kind of cash bonus, that is found to be very much simpler and more advantageous than one which involves the issuing of shares. That is unfortunate.
In the case of the cash bonus this is allowed as an expense by the firm for tax purposes and tax is deducted before the payment is made to the employee. Where shares are issued the tax position is much more complex from the point of view of the employing firm and of the employee, if the shares are issued at less than full market value. Most firms would prefer to do it that way and the employee is taxed on the benefit, that is, on the difference between the amount paid for the share and the full market price of the share. He has to pay that tax out of his own wages, unless it is found in some other way. My hon. Friends and I raised this point last year

and I hope that we shall have the opportunity of raising it again this year.
In addition to encouraging saving, we must encourage new enterprises. One of the effects of the credit squeeze has been to make it more difficult to start new enterprises. It has made it more difficult for the small businessman either to start or to expand his existing business. Again, I come back to the question of Surtax, because I have found some small businessmen very puzzled when they hear that the Chancellor has granted these reliefs to those in the higher income groups while, at the same time, issuing directives to the small businessman's bank manager to squeeze on and squeeze harder.
I should like to know the Government's policy on this subject. For example, is it the intention to maintain the credit squeeze as tightly as ever whilst the Bank Rate falls? This point was raised in an interesting way in a leading article in the Economist last week, to which reference has already been made. Perhaps I might be permitted to remind the Committee by reading a brief extract from that article. It said:
 Money is now rationed partly by price and partly by physical controls (directives to bankers, references to the Capital Issues Committee, and so forth). Within the confines of this double control, the demand for short funds has once again fallen short of supply. The reaction last February was to lower the price of money, but to keep the physical controls intact; indeed, by last month's extension of the power of the Capital Issues Committee, the physical controls have been actually tightened. For any commodity but money, the natural impulse of a Conservative Government would have been to put the emphasis the other way round. Why not in money? 
It would be interesting to hear the answer to that question.
Assuming that we are moving towards a freer economy, there is a strong case for the reform of taxation. There are opportunities which should be taken now for the reform of taxation. The time has arrived when there might well be a flat-rate of Profits Tax, as recommended by the Royal Commission, although I should like to see that accompanied by a reduction of, say, 6d. in the Income Tax. Without waiting for that, the Government might well remove the burden of Profits Tax which falls on building societies, which, after all, perform a very valuable service in encouraging saving.
Many other reforms might have been introduced this year, but I do not wish to be critical only. I welcome some of the provisions in the Bill. I welcome the removal of the tax on the live theatre and sport, and I support the changes in the Entertainments Duty, so far as they go. I welcome the relief for those over 65 with small incomes, and the changes in the child allowance—subject to the point that I have made about the apprentice. But in considering the Bill one is bound to point out what has been omitted and the opportunities that have been missed.
I remember a picture in Punch, some years ago, which illustrated a very strict and stern-looking nursery governess leaving church with a small boy holding one hand and a small girl the other. The small girl was saying, "Nannie, what have you done that you ought not to have done?" I do not want to press that analogy too far. There are things that the Chancellor has done which he ought not to have done. Some of his priorities are wrong. I am mainly concerned, however, with those things that he has left undone and the opportunities that he has missed. I hope that some of the defects will be remedied before the Bill reaches the Statute Book.

6.7 p.m.

Mr. Hugh Fraser: As the hon. Member for Huddersfield, West (Mr. Wade), on behalf of the Liberal Party, has said that his party will seek to move about 20 Amendments in Committee, I will not attempt to answer or correct any of his arguments this afternoon.
I should like to turn the attention of the House to the question of harbours and shipbuilding. Last night, the Minister of Transport and Civil Aviation said, of the Suez problem, that every effort must be made to build bigger tankers and deeper harbours. I am sure that, after the Suez experience and what happened to the various pipelines in the Middle East, the majority of the House will wholeheartedly agree with my right hon. Friend, but I do not think that in the Finance Bill sufficient emphasis is laid on this general intention.
It is perfectly true that the investment allowance for shipping is doubled from 20 per cent, to 40 per cent., but as far as stimulus to the creation of new assets

goes, I think that hon. Members are aware of the various loopholes in taxation and that it is merely a matter of substituting the Treasury arch for the Bermuda loophole, though there are advantages in capital which will now accrue to the shipping companies. But even assuming, as one hopes, that the shipping companies will go ahead with a major construction, and assuming that general backing can be given by the Government to the encouragement necessary for the heavy tanker construction programme and for the new type of financial arrangements in this country and the United States and the general atmosphere conducive to the creation of such a programme, which I believe absolutely necessary for this country, we shall still find ourselves in difficulties.
The first difficulty is that we shall find ourselves short of facilities for receiving these larger tankers and servicing them. I fear that, unless something is done, the shipping industry will not be able to cope with the problem. Taxation, of course, is only one of the points which bear on this. There are far wider issues of need which no Government can ever touch.
A projection into the future of what world transport of oil is likely to become over the next twenty years and what the British share in that world transport should be, gives some measure of the need for us to be fully involved right from the keel being laid to the point of issue of the oil. It is fair to say that over the next twenty years the necessity for moving the free world's oil will rise from 300 million tons to 900 million tons a year. British ownership of that oil in transit should rise from about 25 per cent, today to 40 per cent. In our hands it will be of inestimable benefit not only to the shareholders of the companies concerned, but to the whole country's balance of payments.
When we get this increase in oil movement it is almost inevitable that it will be moved in larger and larger tankers, of 65,000 tons and even more. I will not dwell on the strategic advantage to the country of possessing such a fleet, but I merely say that in all probability, for strategic and economic reasons, that is how the oil will be moved. How are we fixed for coping with it? First, I do not believe that there are more than three ports in this country that can take 65,000-ton tankers.
As for dry and graving docks, the beam of the tankers is so constructed as to be out of normal proportion to its length. Most of the graving docks in this country that can take 75,000-ton ships cannot take even 60,000-ton tankers. Only two graving docks can take them at present. What about the shipyards and the berths for the construction of these very large type of tankers? Here again, I think I am right in saying that there are only six or seven berths in the country from which a 65,000-ton tanker can be launched.
It is probable, judging from the figures, that we shall see a decline in our proportion of world shipbuilding. Nearly half of the world tonnage of ships launched today is tanker tonnage, and of 5 million tons of dead-weight tanker tonnage launched this year about 750,000 tons were from British yards. As the size of the tanker goes up, that proportion is likely to fall. When we get into the 1960s, world annual launchings may be at the rate of more than 12 million tons a year, and it is very improbable that we shall be maintaining our same proportion.
The decline in our proportion of world launchings is equalled only by the decline in our ownership of tankers. In 1939, this country owned 26 per cent, of the world's tankers. Today, it owns only 19 per cent., and only 16 per cent, of tankers building at present are due to sail under the British flag.
There are many factors in this problem beyond taxation. There are arguments against the country going in for tanker construction. There is the argument of the labour per ton and that it is actually better to invest in smaller ships selling at £300 per ton rather than the big tanker which sells today at £90 per ton or even less. There are arguments to the effect that the steel is not available. There are various arguments about order books and about keeping the size of the industry small. I ask the Government and the industry, and those who put forward the labour content argument, to consider that unless we "think big" in this country, we shall go under.
The argument of the labour content would finally reduce us to being a nation of watchmakers, involving a maximum effort to contain the greatest possible amount of labour inside the smallest possible weight of imported materials.

But as one looks forward to the possibilities of increases in the heavy sections and in steel plate, which will be rolling out of the British steel industry in the next two or three years, I believe that the shortage of steel will disappear, and I believe that now we must start getting equipped to produce the necessary tankers to import our oil supplies.
What action on taxation could the Government take? First, as regards harbours and facilities, last year there was a small advantage given to slipways in the sense that excavations, which in previous Finance Bills had not been considered to be part of industrial building, were allowed to be written off at the normal rates for industrial buildings.

Mr. Nabarro: At 2 per cent, per annum.

Mr. Fraser: I will come later to the actual working out of that concession.
There was also some help for the dredging of harbours in the Finance Bill last year, but it still takes forty-five years to write off a graving dock. Yet my right hon. Friend the Minister of Transport, who ought to know about these things, said yesterday that we want more tankers and deeper harbours. If the Government want more tankers and deeper harbours, they must do something about getting them, and the present provision is not adequate.
The various shipping companies are today considering building new jetties, quite apart from slipways. There again, it takes forty-five years to write off one of these. Yet all hon. Members know it is possible that in forty-five years we shall have moved into the atomic age. How, then, can one expect people to make huge investments which cannot possibly be written off in that time?
It is the same with certain major assets in British shipyards. I do not offer any expertise, but I know from reading, and from my friends in the industry, that many shipyards have not been reorganised for scores of years. There still hangs around the industry the great history of the depression. Naturally, both the workers' side and the management side still have the ghost of Jarrow permanently looking over their shoulders. What the Government must do is to give a new impetus, which taxation relief can do, to this essential industry.
There are two main arguments for action by the Government. First, there is the semi-strategic case. In a realm of high taxation, where the country is generally overtaxed, one simply must be unfair. One must pick out the asset to be developed. In the same way, in such an overtaxed economy one can make progress by using taxation as the incentive. I do not mean by giving an investment allowance for two years and then by withdrawing it. That is not a carrot, but a doped carrot. I mean a steady backing to get the industry right. Secondly, there is the necessity for forcing a revolution in the industry, and for creating over the next decade what I believe in the U.S.A. is called a crash programme in tanker construction.
I have mentioned in other speeches the idea that since we have made cuts in defence there should be something in this country similar to the American Office of Defence Mobilisation. I believe that the Government should decide what are strategic, or semi-strategic, priorities and that action should be taken. It would not be impossible—though I do not advocate it this afternoon—to apply one day the same method as is applied in America, namely, of writing off two-thirds of an asset within five years, whatever it may be, if it is an essential national asset in defence. What has happened in Suez, what could happen in the Middle East, what could happen in British industry without oil makes some such action desirable.
There is an ingenious American method of depreciation, which, I believe, is called "The sum of the digits", which is no doubt well-known to taxation experts on both sides of the House, by which years in the life of an asset are added in mechanical sum and made into annual fractions of descending value, so that if the life of the assets were six years, the write off would be six twenty-firsts. I believe that there is a simple alternative to that, and I propose to attempt to move a new Clause to that effect during the Committee stage of the Bill. It is to increase, not the investment allowance for port facilities and shipyards, but to make it possible for their owners to write off their assets far more quickly than they can do today.

Mr. Nabarro: And ships?

Mr. Fraser: Ships can be written off quickly under the new allowance. There should, I believe, be an increase in the initial allowance from 10 per cent, to 20 per cent., and an increase in the rate of annual allowance from 2 per cent, to 5 per cent. This would mean that one could write off the asset of a graving dock, which is essential to receive and service the big tanker, and also new slipways, in seventeen years instead of in forty-five years, and it would not be an enormous expense to the country.
After our experience in the Middle East it is vital to safeguard our essential interests, and these can be safeguarded today by the provision of an adequate supply of large tankers and by a proper share for the shipbuilding industry of the steel industry to assist management and workers in this country in the development and movement of the huge assets in oil which we still own throughout the world.
I believe, also, that to make what the Government need now, and must want now—which is a proper tanker construction programme of large tankers—there should be assistance by way of taxation relief in the facilities for their construction and reception.

6.23 p.m.

Mr. Donald Chapman (Birmingham. Northfield): I will not comment on the expert speech of the hon. Gentleman the Member for Stafford and Stone (Mr. H. Fraser) on a subject about which he knows a great deal, except to say two things. Anybody who looks at the figures of shipbuilding today in countries such as Japan, and the other countries which are newly coming into increased production, share a number of his fears. On the other hand, the hon. Gentleman will realise that once we begin to open the door for allowances to specific industries we will not know where we shall end. At this time, it would be difficult to justify a departure from the general rule beyond what has already been done in this Bill to give the shipping industry extra investment allowances. Therefore, the hon. Gentleman may be pleading more for future years than for this year.

Mr. H. Fraser: Would the hon. Gentleman agree that it would be justified in order to get moving on harbours and docks?

Mr. Chapman: That is the point I am making. Once we widen the concession we shall get claims from all kinds of other industries for equal consideration on the grounds of national importance and it would, therefore, be difficult to go much further in the case of this industry than the Chancellor has gone in the Bill.
Today, we had a speech from the Financial Secretary which was fully in accord with tradition, in that the hon. Gentleman opened the debate with a quiet and expert exposition of the contents of the Bill. Even though he did that in accordance with tradition, we on this side of the House must make it clear that his quiet speech, leading to a quiet debate, has by no means led us to drop any of our strong opposition to large parts of this Measure.
The hon. Gentleman the Member for Scarborough and Whitby (Sir A. Spearman) was right when he said that we were to judge the Bill by its effect on our economy. I should have thought that if we looked at economy at this moment we should find that the biggest problem facing us is that, having come through a period of demand inflation—having mastered it at long last by the slow-moving financial measures of the Government—we are now in danger of a wage-price inflation, and that this is the biggest inflation danger of all at present.
Therefore, it is that aspect of the health of the economy which must be the main one against which we judge the effects of the Budget. If we do that, I am sure we shall find that this is a very unfortunate Budget, particularly because it is no use taking it in isolation. I was surprised that hon. Gentlemen opposite raised a furore when my right hon. Friend the Member for Smethwick (Mr. Gordon Walker) mentioned this in passing. We must take with the Budget all the other measures of the Government in financial matters over recent months.
After all, this is how the average citizen feels. He does not feel the impact of the Budget separately from the rest of the policy of the Government. He merely wants to know how the costs or the charges or the subsidies are going up and down, and he does not care whether these come in the Finance Bill or not. So, if one makes that examination of the policy of the Government, one finds that this

Budget is a direct contribution to further wage-price inflation.
First, we have had outside the Budget the things mentioned by my right hon. Friend—for example, economies in subsidies for school meals and the projected rise in national insurance contributions to save expenditure on the National Health Service. Then there is the Rent Bill, which is going through the parliamentary process. There is also the ending of the housing subsidies, with their effect on the rents of council houses.
On top of that, we now have a Finance Bill which provokes even further by reserving virtually all these tax concessions for the Surtax payer. I can imagine nothing more calculated at present to excite further wage claims, and to make the danger of wage-price inflation even more pressing, than a Budget which does that.
I understand that one of the Courts of Inquiry has proposed an advisory body on wages. Speaking for myself, I should think that there is very little that any such body can do effectively at the moment, because if it enters into the Government's policy, which is provoking wage claims, it will be "dabbling in politics", and if it does not do so, it will be dismissed as useless for its lack of consideration of the general background of wage demands.

Mr. Nabarro: The hon. Member has just said that the Government have reserved the whole of their tax reliefs for the Surtax payers. Those were exactly the words he used. Out of the total of £98 million of tax reliefs given this year, £9¾ million in a full year will go to the Surtax payers, which is about 10 per cent., not the whole.

Mr. Chapman: I am not really interested in the hon. Gentleman's argument. The answer to him is quite simple, namely, that in the first place I said virtually the whole and, secondly, that I was, of course, dealing with the concession to private taxpayers. We are talking here largely of the impact of direct taxes on the community. I am talking about who gets most out of the Budget. That is the right way to judge the Budget as a whole.
I want to spend a few minutes putting to the Government a few more questions


on the lines of some which I put in a short speech at the end of the Budget debate. They are about the effect of all this on the balance of payments situation. There we have a situation where, in the next twelve months, the Government will be taking a deliberate gamble. I do not object to that. To get out of the stalemate of production, consumption and imports it may be worth taking a gamble.
I want to know why and how the Government think that the gamble will work out in the coming twelve months and whether the risk they are taking is legitimate. The background of all this is Table 2 of the Economic Survey, which must haunt everybody who thinks about the balance of payments. In that table can be seen the farcical but crucial nature of tiny shifts in consumption exports and imports, investment and stock building. In spite of a national income of £20,000 million, we need only a 1 per cent, movement, a movement of £200 million, in the wrong direction in some of these, and we have an acute balance of payments crisis. That is farcical in view of the huge figures involved.
The equivalent result in 1938 was a £50 million deficit in our balance of payments which passed unnoticed, simply because at that time we had enough reserves to ride the storm, the very small storm as it was then. Today, with two and a half months' reserves, the 1938 deficit in our balance of payments is something which could bring us very near even to devaluation of the £. As these very small movements in the next twelve months can, as they did in 1955, bring us very near to another terrible crisis, we ought to know more about the figures upon which the gamble is being taken.
We do not know how the Chancellor expects these figures to go, yet a very small movement will give us a very big crisis. It is even more important in the sense that we have not only to maintain the 1956 position, but from 1959 onwards begin repaying some of the very reserves on which we are now depending and which we have borrowed. From 1959 onwards, £591 million reserves for a start have to be repaid. As was mentioned in the Budget debate, we need an even bigger balance of payments surplus

because of the likely demands of the sterling area on sterling balances in the next twelve months, and beyond.
It is not good enough to start out with all the figures moving, as I will show, towards the same sort of pattern which we had in 1955 and which produced a crisis, and yet to say that we are just simply hoping that the gamble will succeed. I am not saying that there will be a crisis. I am saying that we need an explanation of the way it is expected to work.
What happened in 1955 and in 1956? Let us take them in the reverse order. In 1956, we managed to hold and improve our balance of payments surplus by holding production, holding back consumption, holding back imports and pushing up exports. That was the only way in which we could get our balance of payments surplus. In the previous year, when we had a crisis, we had an increase in consumption, a big increase in investment, but an enormous increase in imports and a relatively modest increase in exports. That is beginning to happen in 1957, and it is not at all reassuring.
Admittedly, exports are now increasing. Admittedly, we have them going up quite merrily, but what is also beginning to happen in the first quarter of the year is that imports are going up more than exports. Far from holding them steady, which was the key to our success in the situation in 1956, they are already rocketing ahead. Imports are up more than exports compared with last year. Again, retail consumption increased in January and February by 8 or 9 per cent.
This situation will make itself felt most in the latter part of the year. Although some of us at one time thought that investment would be held this year, and to that extent—whether good or bad is a different matter—would help the balance of payments, the Treasury Bulletin shows that investment will increase this year. This is all the pattern of 1955 which produced a crisis because consumption rocketed, because imports rocketed and because the whole thing got out of hand.

Mr. Nabarro: It still produced a Tory majority.

Mr. Ede: Disaster on disaster.

Mr. Chapman: We do not know what will happen to stocks, and in an Answer to a Parliamentary Question the other day the Chancellor said that he did not know. We can only leave them out of account. We are entitled to ask whether these things are beginning to go ahead in the order of magnitude which produced a crisis in earlier years. We ought to have some calculations from the Government about how they expect good to come out of the situation.
There is a second thing which we ought to ask and that is that the Government are at least cautious. I have admitted that they have to take a gamble, but they ought to go ahead very cautiously. Last Friday, the Chancellor spoke to the National Production Advisory Council of Industry. I was very alarmed at the headlines in the national Press after his speech. The headline in the Manchester Guardian was:
 Chancellor's hint of credit relaxation.
That was the second headline, the top one being:
 Economy takes a turn for the bitter",
The first sentences which followed were:
The Chancellor of the Exchequer believes that the economy may be about to take a turn for the better and that the period when production had to be restricted (by the credit squeeze) may soon be over. At the Treasury yesterday he told a meeting of Ministers, industrial leaders, and senior civil servants that it would now be safe to allow the economy to expand provided exports continue to increase and provided production kept pace with rising wages.
The key to all that is that the impression given by those headlines, and apparently by the Chancellor's speech which inspired them, is that we are now not only doing so well that we can take a gamble, but that we can go even further than the Chancellor has gone in the Budget and begin to dismantle the rest of the credit squeeze.
Are we now on the verge of a big reduction in the Bank Rate? Are we on the verge of seeing the withdrawal of directives to bank managers about advances? Are we on the verge of seeing the rest of the restraints, the brakes, as the hon. Member for Scarborough and Whitby called them, thrown away because we seem gradually to be moving in the right direction? What we want to hear from the Chancellor is why he thinks that he will get away with the gamble

before it is too late and before he has thrown away too many of the brakes.
The danger will come not now, not in the next three months, but in the autumn. That will be the testing time. I hope that the Chancellor will hold steady at least until the autumn with the relaxation already announced. It will be in the autumn that we will get the real increase of the pressure of consumption at home, preventing goods going for export. Once the expansion of home consumption has depleted stocks, we will get, as we did in 1955, the effect being felt in the latter part of the year and beginning to affect the amount of goods which should be going for export.
It was rather significant that the day after the Budget itself we had a beautiful advertisement in the main newspapers about a beautiful and most expensive car "Planned for top management." Managements were invited to buy these cars, the sort of cars upon which we are so heavily dependent in the export trade. Half-page advertisements appeared throughout British national newspapers at the time. Of course, it was only a coincidence, but it is that kind of thing whose economic effects will be felt later in the year.
What also makes me fear the autumn is that the increase in consumption is in household goods and motor cars. Those were the articles where there were economies last year, economies which led to the general steadiness of consumption at home. If they are beginning to run away, it is likely that much other consumption will also begin to run away.
There is also the question of what will happen in the autumn to things like steel sheet once production begins to rise. Motor car manufacturers have already said that they face an autumn when they will not have enough sheet steel to fill home and export demand, and that is significant. If there is a big demand on the home market for motor cars which should go for exports which the economy needs, will we begin to start importing sheet steel for motor cars for the home market? That is the sort of thing which was a symptom of the dangers and difficulties in the latter part of 1955.
Generally, what we are concerned to know is, with all these lessons about the adverse effects which the movement of


a mere £200 million can nave, now can we get a large enough export surplus to give us not only the sort of balance of payments surplus we had last year, but the sort which is needed to build our reserves and to repay the money which we borrowed last year and which now forms part of our reserves.
That is important, because if the gamble fails and there is one more crisis, it will be the last for a long time. While I agree that the Chancellor must take a gamble to get production rising again, we must have the figures on which he has based his gamble after the frightening lessons of previous years.
It is important to ask the Chancellor these questions because of some lessons we have learned about the Treasury in the last few years. These lessons have not been more clearly stated than in an interesting article in Lloyds Bank Review, by Dr. Ian Little, who was at one time the Deputy Director of the Economic Section of the Treasury. I see the Financial Secretary smiles; I believe that he has read the article. Anybody who reads this article must have cause to fear about the economic prognostications made by Treasury Ministers.
The former Deputy Director's article tells us how they are made inside the Treasury and explains some of the disadvantages in the way in which the Treasury is staffed to cope with these problems. Referring to the Economic Section of the Treasury, which deals very largely with the problems which I have been discussing, he says that
 it should be clear from its size that it is not in a position to enter fully and intimately into all aspects of economic policy, at least not with the profound knowledge which is required if its opinions are to be as soundly based as they might be. This is true especially since quite a lot of time of its members is taken up with routine matters.…The Section is too small and too busy for its members to have reasonable opportunities of trying to extend these frontiers [of economic knowledge] or for any profound study of longer-term policy issues.
That would not be so bad, but when he speaks of his own experience inside the Treasury the article is quite disturbing. I presume that this is during the time the Lord Privy Seal was Chancellor. The article goes on:
 It sometimes seemed to me that a new line of policy was invented and even accepted "—

that is, in the Treasury—
 in response no doubt to a change of Minister or at least a shift in the Minister's attitude, with a startling rapidity which made impossible a full appreciation of what it might involve, and whether it would really meet the Government's aims.
I will not bore the House with more quotations from the article, the rest of which is in the same vein, but it appears that the very bad diagnoses of what was to happen in the next twelve months, which we have had in the last few years, have not been due just to the bad luck of the Chancellor, but have also been due to some extent to faults of organisation and staffing of the Treasury itself.
This made me think very much of some of the quotations we have had in the last few years. There was the wonderful "clanger" dropped by the Economic Secretary to the Treasury last year when he said that he expected that there would be an appreciable rise in production in 1956. Was that based on Treasury information? In the previous year the Lord Privy Seal told us,
… I estimate that the increase in home demand should be appreciably less than it has been in the last two years."—[OFFICIAL REPORT, 19th April, 1955; Vol. 540, c. 54.]
He said this at a time when he was letting go rip-roaring inflation which was already well on the way.
Speaking of his own policy for keeping inflation in check and talking of what he called the "right road between inflation and deflation" he said, in April. 1955:
 I believe that with the aid of those two weapons, incentive on the one hand and discipline on the other, with the Budget surplus and our monetary policy, we shall this year steer… that course."—[OFFICIAL REPORT. 19th April, 1955; Vol. 540, c. 575.]
Everybody knows that the course led to an autumn Budget and a crisis in our balance of payments. The fact that these had never been foreseen and were not expected by the Treasury at that time is shown by those words.

Mr. Raymond Gower: It is fairly easy to show by reference to what has happened in the last ten years that Ministers of both Labour and Conservative Governments have found it extremely difficult accurately to forecast trends. Would not that indicate to the hon. Member the folly of the Government trying to manage the economy too closely?

Mr. Chapman: I should be glad to enter into that argument with the hon. Member on another occasion, but I am not now talking about whether the economy should be managed too closely in terms of controls; what I am suggesting—and the Economist and other newspapers have said exactly the same sort of thing—is that if the Chancellor is making a fundamental departure compared with the policy which kept the balance of payments in surplus in 1956, then at least we should be given some estimate of how he thinks this departure will work out correctly. All I am doing is backing up this demand by saying that when the Government "chanced their arm" in previous years and proceeded, even on similar lines, none of their prognostications sounds very good in retrospect.
When I made a few remarks about this in the Budget debate the Chancellor went out of his way, in his winding-up speech, to reply to me very briefly. He told me that the answer was that exports were rising. Frankly, that is not a sufficient answer. The fact is that they must rise by such a startling degree to cope with both the considerable increase in consumption at home which is drawing in further imports, which will need to be paid for, and with increased investment, that we must know whether he feels that the increase will be startling enough and to what degree he thinks it will be startling enough to prevent the same sort of pattern emerging in the autumn as emerged in 1955. In view of the very great departure which he is making from the pattern of last year in connection with the balance of payments, I do not think that is an unreasonable question.
On the whole, our complaint about the Budget is, first, that it will increase the wage-price inflation very greatly indeed and, secondly, that we are concerned about the health of the economy in the next twelve months. I have tried to make a moderate approach to the Chancellor in the hope of getting some information from him. We ask very sincerely that we should at least be provided with more information than he has given us so far.

6.48 p.m.

Mr. E. H. C. Leather: It is customary in the House for us to say that we are pleased to follow

an hon. Member who has just spoken, but I must confess that I am not sure whether I am pleased to follow the hon. Member for Northfield (Mr. Chapman) or not.

Mr. Nabarro: I should not be.

Mr. Leather: I have been trying very hard to follow his argument, and the harder I have tried the more bewildered I have become. I believe that the hon. Member is an economist. Is that correct? He is a student of economics. I am only a business man earning my living; but the more I listen to economists the more bewildered I become.
At one moment I thought I heard the hon. Member say that the credit squeeze was a wonderful thing and that he hoped the Chancellor would not dismantle it. I suppose that conversion to economic sanity, if it comes at all, is always welcome, but that statement is certainly the opposite of comments which hon. Members opposite have been making for many months.
I also thought that the hon. Member said that he was worried about the position in the motor car industry in the autumn because, as a consequence of my right hon. Friend allowing rip-roaring inflation to get started—those were the words he used—the motor car industry would be overstretched and there would be a shortage of steel. I can remember sitting in the House at Question Time day after day two or three months ago listening to the hon. Member, with his profound knowledge of economics, raising Cain with the Government because he thought that by the autumn the whole motor car industry would be unemployed. Only two or three months ago he was saying that day after day. Now he says precisely the opposite.

Mr. Chapman: If the hon. Member will read my speech he will find that I said, quite deliberately, that I expected that in the autumn of this year the motor car industry would be back to full production and well on the way to the sort of situation that we have had in previous years. I am sorry if he misunderstood me.

Mr. Leather: I am delighted at this deserved expression of confidence in Her Majesty's present Ministers.
I thought the whole game was given away when my hon. Friend the Member for Kidderminster (Mr. Nabarro) tripped the hon. Member up after the hon. Member had quite specifically and carefully said that the whole of the benefits of the Budget were being paid to the Surtax payers. It was pointed out to him that far from being the whole, it was a comparatively small fraction. He then blandly said that it did not matter, for it was the kind of thing which provoked wage claims. It is not the facts and figures which provoke wage claims but the gross distortion deliberately put on the facts and figures by hon. Members opposite for their own party purposes. That is what does the damage, not the facts. As for provoking wage claims, the experience of the last seventeen years shows that whatever kind of Budget any Government introduce, we get an annual wage claim just the same. That argument is therefore no longer very impressive.

Mr. Roy Jenkins: The hon. Member appears to be basing his case on the statement of his hon. Friend the Member for Kidderminster (Mr. Nabarro) that only 10 per cent, of the tax reliefs given in the Budget went to Surtax payers. Could we have his view on whether it is 10 per cent, or a little more or a little less?

Mr. Leather: It is 25 per cent.

Mr. Nabarro: I quoted the figure of £9¾ million, which is 10 per cent, of the total tax reliefs; and the £9¾ million released to personal allowances for Surtax was quoted by the Chancellor of the Exchequer in col. 999 of the OFFICIAL REPORT of 9th April. It was on that point that I corrected the wild statement of the hon. Member for Northfield (Mr. Chapman).

Mr. Leather: I will leave the hon. Member for Stechford (Mr. Roy Jenkins) and my hon. Friend the Member for Kidderminster to differ in their interpretation, if they wish. The point is simple, and it is that the hon. Member for Stechford cannot make the sum a penny over 25 per cent, whereas his hon. Friend the Member for Northfield quite deliberately said "the whole." Let us not quibble about 1 per cent, or 2 per cent, one way or the other. I am pointing out that the interpretation which the hon.

Member was deliberately putting on the Budget to try to make a case and to show that it would provoke wage claims is based not on the truth but on a deliberate distortion.

Mr. Chapman: The hon. Member must get this right. I said "virtually," for a start. He knows perfectly well that immediately afterwards I made it clear that I was referring to personal taxpayers, which is the important point. The question is, who is getting the reliefs in the community?

Mr. Leather: That may be, but I think, with respect, that the statement which the hon. Member made was quite clear, and I hope to deal with it a little later.
I should like to deal with a comment made by the right hon. Member for Smethwick (Mr. Gordon Walker) when he said we may be investing too much abroad. That may be true, but it is a startling idea.

Mr. Gordon Walker: It is not very startling.

Mr. Leather: It is very startling when we consider the source, because the whole of the party opposite have been raising all the rumpus they can with the Government ever since we have been in office because they say we are not investing nearly enough in the Commonwealth and ought to invest a lot more.
We have heard all kinds of proposals from hon. Members opposite, including some in a letter to The Times not long ago by a right hon. Gentleman opposite, in which it was stated that in the next Labour Party programme there would be a demand that at least 1 per cent, of the national income should be invested in the Commonwealth every year. Many of us thought that was a courageous scheme, but then, of course, hon. Members opposite began to study the arithmetic, and now we have the right hon. Member for Smethwick saying that we are probably investing too much abroad already. We do not mind. All we say is, "Get together boys, so that we know what kind of argument you are putting up at any given time, because otherwise it is rather confusing."

Mr. Gordon Walker: I related what we can export in the way of investment to our balance of payments surplus.


Were that bigger—as it would be under a Labour Government—we could export more.

Mr. Leather: As in 1947, 1949, and 1951? No doubt the right hon. Gentleman has forgotten the experiences of those three years.

Mr. Cyril Bence: It was bigger then than it is now.

Mr. Leather: With respect, I think that the argument is irrelevant to the main issue. But it is fascinating to hear this much more sober Conservative talk from the Front Bench opposite.
I welcome this Bill; I think it is a good Measure. The only thing about it that raises my suspicions is the premise on which it is based, of an enormous Budget surplus. I wish to dwell on that aspect for a moment. I do not want to get into some deep economic argument because that is right out of my ken, but I wish to refer to the pure finances of the Budget surplus, and I would relate what I have to say in particular to what my right hon. Friend has so rightly done about reducing the Purchase Tax on household goods.
The theory behind the iniquitous "pots and pans" Clause, which I admit with shame I voted for—I was utterly ashamed of myself for having done it, because it was economic lunacy—was that it would mop up surplus purchasing power. Ever since the end of the war we have been told—particularly by the late Sir Stafford Cripps—that the experts at the Treasury must have a huge surplus every year to mop up the surplus purchasing power that people like me have not got. They do it by the effective method of putting on a tax that we have to pay, and which always irks most of us. I am sure that it irks the hon. Member for Coatbridge and Airdrie (Mrs. Mann), because I have heard her wax eloquent about it so many times.
I wish to question my right hon. Friend and his advisers about whether that theory is still real. I do not believe it is. I believe that we have reached the stage where the economic conditions under which we live have changed so much that a good many of the Treasury experts and the chairmen of some of the big banks are just as much out of touch with the realities of industry today as they were in the 1930s. This argument that we

have to mop up the purchasing power in order to prevent inflation has long outlived its usefulness. The British animal, being infinitely subtle, has adjusted himself to it, and all that happens is that the next round of wage increases is speeded up. That is followed immediately by the next round of price increases, and everything balances out exactly as before, except that it is on a higher level. Every time it happens the problem of old-age pensioners and retired professional people living on fixed incomes is worsened.
About this huge surplus on which my right hon. Friend has based his Budget for this year I would merely comment— I do not wish to pursue the argument further because I do not desire to take up too much time—that whatever may be said about it as an academic argument and whether it is good or bad, one thing can be said as a proven fact. It is that the theory that a huge Budget surplus stops inflation "ain't worked". We have had ten or twelve years of inflation under every kind of Government. If we study the economic surveys and prognostications of Sir Stafford Cripps, who was supposed to know what was going to happen, we find that he was just as ignorant as I and my right hon. and hon. Friends. When he budgeted for a surplus he had the biggest run of inflation thereafter, and so I am saying that the pure fact is that the argument is not proved, because it has not worked.
I wish to address myself for a moment to Clauses 10 and 12, the Clauses over which the right hon. Member for Smethwick worked up such passionate indignation which I am sure could have been felt at least two or three inches away from him—it did not make any impression at this distance. May I ask hon. Gentlemen opposite to consider the problem of Surtax objectively—if they can bring themselves to do so? I believe that this Surtax problem and the question of incentives is one of the most important economic factors which we have to consider; and that simply to laugh it off and say that it affects only a few thousand Surtax payers is not realistic. It does not affect only the £2,000 to £3,000 a year men. It affects every young man in any profession or industry in the country, because if he is ambitious he is anxious to become a Surtax payer in the interests of his wife and family.

Mr. Bence: His employers will not let him.

Mr. Leather: With respect, I do not think that is true, and it is something not worth pursuing.
This is not just a question of those lucky enough to have climbed into the higher tax brackets; and in industry today there are few people left who have got into that range of income in any other way than by working their way up. The reliefs that my right hon. Friend has given are purely on earned income. There cannot be any question about that. There should not be, although hon. Members opposite put about the idea that there are millionaires in yachts in the south of France who are increasing their wealth. If there are, they are not people who have got anything out of this Budget. These are earned income reliefs which go to those working in industry, and the argument about Surtax payers, though it is fascinating, is quite wrong.
The idea that only a handful of company directors are affected is incorrect. Discouragement is seeping throughout industry. We find senior people who are disgruntled and discouraged, as, in my opinion, they have every justification to be, because they cannot reap the fruits of their own labours. Instead of encouraging young men to follow in their footsteps, they are saying, "I cannot think why you stay here. Why do you not go to Canada, or to the United States, where you can get more money?" That is happening throughout the country. [HON. MEMBERS: "Oh."] It is a tendency of hon. Members opposite to try to laugh it off and think that it does not matter. But that is simply to ignore the basic problem which we are facing, and which, were they in office, hon. Gentlemen opposite would have to face.

Mr. Chapman: I wish that the hon. Gentleman would reduce the temperature a little. If he reads the debate which took place last June, he will find that hon. Members on this side of the House were in favour of concessions to Surtax payers. We are asking for an adjustment of Surtax precisely to help the £2,000 to £3,000-a-year man and those with families. But what we said, and we still stick to it, is that the argument is only valid if the price of this comes out of the pockets of the richer Surtax payers

and the total yield of Surtax remains unchanged. Is that unreasonable?

Mr. Leather: It is not only unreasonable, it is downright unrealistic. The hon. Gentleman is saying that in order to give a little more incentive to one person we should take something from another.

Mr. Harold Wilson: The Royal Commission said it.

Mr. Leather: The Royal Commission said many things, some of which both the right hon. Gentleman and I agreed with and others of which we disagreed with. I am not concerned about what the Royal Commission said on this subject. We shall not provide an incentive which will have a dynamic effect on industry by juggling money from one surtax payer to another. That is complete nonsense.
Right hon. and hon. Gentlemen opposite howl about the need to spend more money on education, to spend more on the young technicians and technologists in industry. Then they say to these young people, "We have spent this money to equip you to do a good job in industry. But you must be clear about the fact that whether you loaf through life or sweat your guts out doing a good job, the net result will always be the same—we shall take the reward away from you in the form of Surtax."

Hon. Memhers: Nonsense.

Mr. Leather: With respect, it is not nonsense. That expression is typical of the refusal of hon. Members opposite to face facts which they do not like.

Mr. Bence: It is gross exaggeration.

Mr. Leather: With respect, it is not exaggeration. If the hon. Member thinks it is, he need only go into the Library and read Whitaker's Almanack to see what happens to the man on the £3,000 to £4,000 level. There are many people who reach that salary bracket in industry in this country today, and surely we want that. Surely we want many more people to reach that salary bracket, we want to encourage and expand and to build up a dynamic industry. But once a man gets that far he can get precious little further, because from there on after he has paid Surtax he will be left with something like one-tenth or one-fifteenth of what he


worked for. Many people say that they do not think that it is worth while, and I agree with them.
The members of the party opposite are always saying that we must have more and more investment. Then they promptly say, "If you do invest your money, we will not let you reap any reward. We are going to make certain that you will not get more and more from it," and they are surprised because investment does not increase.
Hon. Members opposite are continually saying that in Germany or the United States or in Canada production per man-hour, investment, exports, etc., are increasing at a faster rate than is the case here. Then they violently oppose the very policies that those countries have used to get those results. There is no logic in their attitude at all. They abuse the Government and they abuse industry because they are not more dynamic and progressive. They are constantly pointing to foreign countries and saying how much better they do things, but they will not face up to the logical conclusion of why those countries get better results. It is because they follow more dynamic policies and allow people to keep a little more of the fruits of their own efforts. Everyone in those countries says so; but at that point hon. Gentlemen opposite drop the argument.

Mr. Bence: They pay a lot more.

Mr. Leather: No they do not.

Mr. Bence: Oh.

Mr. Leather: I happen to know a little about this subject.
I now turn to the question of the overseas trade corporations. Unlike right hon. Gentlemen opposite, I am delighted with the object of that provision and with what I think my right hon. Friend had in mind. I must confess that the language in the Bill is highly technical and I do not pretend to be able to interpret it as an expert. There are, however, two points that appear to me not to meet the object which I believe that my right hon. Friend and all of us have in mind.
The first is that Clause 20 (1) simply says:
 a company resident in the United Kingdom shall be known … as an Overseas Trade Corporation …

whether it wants to or not. I think that it is probably not the best way simply to say that this will be compulsory, as the Bill now says, because I think that we shall find—I do not pretend to have been able to get details—that there are some companies which, because of an unusual tax position or capital allowances, this provision will in fact harm rather than benefit. I should like the Chancellor of the Exchequer seriously to consider whether this benefit—and this must be a benefit because the Government are not making this provision for the sheer fun of it—could be made elective rather than compulsive.
There is no breaking of precedent or anything unusual in company taxation in doing that. There are precedents for companies electing to be taxed on a certain basis, but once they have elected to do so, they must stick to that basis; they cannot chop and change each year. They are allowed to decide, in agreement with the Treasury, on the basis on which they shall be taxed. I think that it would save anomalies and difficulties if my right hon. Friend could reword the Clause in that way.
The question of a company being resident in the United Kingdom was raised by my hon. Friend the Member for Essex, South-East (Mr. Braine) during the Financial Secretary's speech. I think that it is a very important point. As the Clause stands, a branch office of a United Kingdom company abroad can reap the full benefit. If it is set up as a local company with residence in an overseas territory it reaps no benefit. I am sure that that is a mistake.
I fully realise that to include an overseas subsidiary is a little more difficult technically and legally, but I am certain that it is important that that should be done for a number of reasons. Many overseas companies, including those in Colonial Territories, quite rightly from their point of view, put considerable pressure on a company to see that it converts its branch into a local limited company. It is often absolutely essential, as well as good salesmanship, to set up a local board of directors and put local people on the board. There are a number of factors like that, where a company, for very good and sound reasons, in aiding the export drive and building up overseas investments, has converted its


branches into limited companies. There are some countries, India is a typical example, where one is not allowed to operate unless one does set up a limited company. The way in which this Clause is worded means that it would be completely impossible for such a company to benefit. I am sure that was not the intention.
I think that the Financial Secretary referred to investment income not deriving any advantage from the Clause. If a limited company is concerned, and it pays big dividends, that immediately becomes an investment income and is excluded from the benefits under the Bill, as I understand it. It may be that there is a Clause which I have overlooked or some complication of which I am not aware, and if so I should like some explanation from the Chancellor of the Exchequer, because many of us are concerned about this point. If I am right, I hope that he can give us an assurance that he will look at this point very carefully before the Committee stage. I think that it would be quite unfair to leave the matter as it stands at the moment. It would be completely arbitrary between one company and another and fail by giving only half the benefit that all of us want from the provision.
I welcome this Bill, despite the derision of the party opposite, and I would still plead with them sometimes to try to think objectively about this problem instead of purely in terms of votes and making wisecracks. If they would just stop to work out the figures, I think that they would come to the conclusion that this is an incentive Budget which the economy of this country vastly needs, and that the great majority of people are grateful to my right hon. Friend for having given it to them.

7.19 p.m.

Mrs. Jean Mann: It is the custom in the House of Commons that one should try to follow the arguments of the hon. Member who has just sat down. I am quite unable to follow the arguments of the hon. Member for Somerset, North (Mr. Leather), about incentives. He described, as did the Chancellor himself, how necessary it was to provide incentives, and he told about the exodus to Canada. Are not the

incentives provided for those having an income of more than £2,000 a year? I believe that the £10,000 a year man without any family has a tax remission of £634.
If a man has reached the heights of a Prime Minister, is he in need of a further push, further incentive? It is true that the quality of our Prime Ministers has not been very bright recently. I understand that it has often been said that they are the best Prime Ministers we can get at the moment. Is the remission an incentive to the £10,000 a year man to get higher? How much higher can one get than Ben Nevis or Mount Everest?

Mr. Leather: Speak up.

Mrs. Mann: I am sorry that the hon. Gentleman should show signs of senility so early in his life. I thought my voice was loud; indeed, some think it is much too loud.
When the hon. Gentleman talks about the exodus to Canada, may I remind him about the medical profession? This question of emigration affects registrars, senior registrars and hospital staff getting under £1,500 a year and mostly under £1,200. If the exodus were among the £5,000 men, nobody would be more delighted than those senior registrars and others who are waiting for the moment when the £5,000 a year man takes a running jump at himself.

Mr. Leather: People are going abroad because of lack of incentive and opportunity under the taxation system of this country. No matter how hard they work they will never get any further here, and that is why they are going. They look around and see that in other countries they can earn up to double, after taxation has been paid, what they would get in this country in the same time.

Mrs. Mann: I am grateful to the hon. Member for allowing me to interrupt him. There are practically no emigrants in the £5,000 to £10,000 a year class. The hon. Gentleman must be very much out of touch with public opinion and with the emigration figures to talk such nonsense, which simply would not be listened to outside this House.
There are things in this Budget that might be praiseworthy, but I do not want


to pass on the compliments to the Chancellor. I prefer to pass on the criticism, because I am afraid that he might remember the compliments when he replies and forget the criticism. I start off with the T.V. fee of £1. It has been excused with the argument that those who can afford to pay from 60 guineas to 80 guineas for a T.V. set cannot object to the extra £1 on the licence. The other argument is that those who are already paying £3 per annum cannot very well object to the extra £1. Today, the Financial Secretary got another angle on it. Repair and maintenance he said, could not cost less than £7 per year. Why put another imposition on top of that?
From where do these arguments come? From what school of economics? Who is the president of it? I suggest he is Mr. Bats of the Belfry and that the school is Bedlam. It is like someone saying to a woman, "You have twelve dresses, all from Hardy Amies. Now you want a thirteenth. As you have twelve expensive dresses you certainly ought to have the thirteenth. You already have six garden party hats that were very expensive. Therefore, you are entitled to a seventh." Or. one might argue with an alcoholic," You have already had eight alcoholic drinks. One over the eight will do you no harm." When we get down to reality, it means that the Treasury comes in at the outset of the purchase of the T.V. set and takes Purchase Tax from the sale. It then has a 200 per cent, increase on the B.B.C. £2 licence fee by making it £3. On every replacement of the cathode ray tube a minimum of £6 goes into the Treasury. Now it says, "Because we have had so much from you, we are sure that you will not object to giving us another £1."
There is the false impression that the getting of a T.V. set is easy. On the contrary, a great many of the people I have met have struggled very hard to get a set. They do without things to get it. They work overtime and postpone a holiday, because a T.V. set means so much in the home. Many people buy these sets for their old people, to bring brightness, life and personality into the lives of the old folk and help to dispel loneliness. Very often it means a hard struggle. Let me give the House a personal case.
When I got my T.V. set—I was among the first to get one—an old person came into my house, and a longing look came

into her face. It made me feel very sorry indeed that she could never attain to a television set. I had great difficulty in drawing her away from it. I went to someone and told all this, and my friend said, "She is a decent woman, but very lonely." I replied, "If I put up half the money for a T.V. set will you put up the other? "In that way the woman got her set. We had not calculated on the other £1 when we paid the first £3.
Eighteen months afterwards, my cathode-ray tube broke down and my set went dead. I was determined it would lie dead rather than I should pay the Chancellor £6 and the monopolists the balance.

Mr. Charles Pannell: It it not worth the money.

Mrs. Mann: My hon. Friend suggests that it is not worth the money. Certainly, the raucous sounds that come out from the well-bosomed women that one sees cause one to have the greatest pleasure in switching off, and in being able to do so without being excessively rude to them without their knowing it.
To return to my subject. My set went "dead." I visited the old lady and found that her set was "dead," also. The same thing had happened to her set, the cathode-ray tube had broken down. The Chancellor was taking this Purchase Tax and doing nothing for us, but for the monopolists who have control of these tubes. I thought there was a case for asking the Chancellor for a reduction in Purchase Tax on cathode-ray tubes. That is why I wholly disagreed with the rather carefree action he took in the imposition of this £1 increase.
I pass to something which I regard as even more serious. For the first time in the history of Purchase Tax, the right hon. Gentleman has imposed a tax on safety in the home. I do not know whether he is aware that in subsection (2) of Clause 6, referring to Group 11, for the first time a tax is imposed on an invention making for safety in the home. We appealed successfully to Sir Stafford Cripps about fire-guards and even the Lord Privy Seal, when he was Chancellor, did not impose an extension of tax on fire-guards. In the "pots and pans "Budget he still exempted fire-guards.
The Fire Appliances Act, 1953, makes it an offence not to have a protection


over the elements of a gas or electric fire. That Act left all vendors to dispose of their old stocks and, today, there are 12 million open fire appliances. In other words, there are electric radiators and gas fires which are unprotected—

Mr. Gower: For the guidance of the House, may I ask the hon. Lady a question? I apologise for interrupting her, but she said that a new tax was being put on something connected with safety in the home. Surely this is a reduction of Purchase Tax from 30 per cent, to 15 per cent. I would be most grateful if the hon. Lady could enlighten me.

Mrs. Mann: For the first time, this device came into the 30 per cent, range about six weeks ago, and now it is to be in the 15 per cent, range. It should not be taxed at all. Gas and electric radiators which do not have the safety device on them can be fitted with it. The gas and electricity authorities go to houses where the appliances are still unprotected and fit these safety devices for 10s., with no Purchase Tax.
There is no Purchase Tax on gas or electric cookers, but a young man won the B.B.C. "Inventors' Club" competition for Britain and overseas by a device to be fitted to an electrical gas cooker which can avoid some of the worst accidents that happen in the home. Promptly, two months ago, that device had a 30 per cent. Purchase Tax imposed on it and the tax is now to be reduced to 15 per cent. I appeal to the Chancellor to have a look at that matter. This safety device has been approved by the Gas Council and perfected by the North Thames Gas Board. It is of great assistance to blind persons, because it limits the sphere of the top of the stove and a blind woman is apt to cant a pot over the side if it is not wedged. This device helps disabled and blind people, as there is a slot for the pan handle.
The Ministry of Health issued a splendid leaflet by the hundred thousand showing the danger caused to children when handles of pans are allowed to jut out from the top of the stove. Yet this invention, which is now on the market, is subject to Purchase Tax. I ask the Chancellor to have a look at that matter. I do not think that he is aware of the past precedents set in regard to these things.

It seems foolish in the extreme to break a very good precedent and that, while cookers are free from Purchase Tax, the invention which can be fixed to a cooker to make it safe is subject to the tax.
We are not getting the benefit of reduction of Purchase Tax. The reduction is from 30 per cent, to 15 per cent. Can the Chancellor tell us how many of these items listed in the Bill are subject to the reduction? We find the greatest difficulty in getting evidence of the 15 per cent, reduction. Previous Chancellors had a good Press showing the fall in the cost of living when they made reductions. Pressmen went round to the shops detailing the prices of articles which had been reduced.
Do they do so today? On the contrary, we find them telling us about certain groups which have already intimated that they are on the way to increasing the prices of certain of these goods. What is the good of reducing an item by 15 per cent, to give the benefit to the housewife if the housewife does not get the benefit? Can the Chancellor deprive those who are not passing on the benefit of the concession?
I wish to make a concluding point in respect of married women. This criticism includes both parties. I wonder how long Chancellors will ignore the status of the woman who goes out to work? At present, she has a personal allowance of £140. She has to pay far more for help in the home, because she cannot obtain a housekeeper for £140. Even a charwoman cannot be obtained for £140 a year. This figure does not meet the cost of replacing her own labour.
Whatever a married woman earns is linked with her husband's income. If she is a professional woman—say, a doctor—her earnings will be probably at least £1,000. If her husband is earning £1,000 her going out and taking up her profession, even on a part-time basis, brings them both into the 8s. 6d. standard rate of tax almost immediately. She is deprived of the £60 at 2s. 3d., the £150 at 4s. 9d. and the other £150 at 6s. 9d. before reaching the standard level of 8s. 6d. If she were a single woman, she would have these concessionary allowances, but as she has made the fatal mistake of marrying she is penalised by the Chancellor by being deprived of these allowances.
I sometimes think that the Treasury is against marriage and encourages living in sin. In the Bill, the £250 allowance for a retired person is only £400 to a married couple. It would be £250 each if they were leading separate lives. Do the Government want them to separate in their old age?
The same thing applies to the marriage allowances. If a woman chooses to separate from her husband, she then has the first £60 of her taxable income taxed at 2s. 3d., and so on, but if she chooses to be reconciled she loses these benefits. Another anomaly is that of the housekeeper's allowance for the man who has to have a housekeeper because his wife has died. If she lives in a house with him, he gets an allowance for her. If she does not, if she is a daily help, he gets no allowance for her whatever. That is a hardship to the man whose house is small and it is a bad example to the children of a man who has been left with children that the Chancellor should say that if a woman stays in his house every night their father will get an allowance, but that if she goes away at night their father will get no allowance for her. These are things which a woman Chancellor would have rectified long ago and I hope that some time a male Chancellor will rectify them.

7.43 p.m.

Mr. Peter Remnant: The hon. Lady the Member for Coatbridge and Airdrie (Mrs. Mann) has not come up to the usual high standard that I expect of her. Perhaps because the pressure of Parliamentary business she has not studied the problem quite as closely as she would wish to do.
There are two points in the early part of the hon. Lady's speech which I should like to take up. When she was talking about the man who received £10,000 a year and comparing him with the Prime Minister, she said that there was no reason why the businessman earning £10,000 a year should want to go higher. If I could imagine for a moment that I was a £10,000 a year man, I should be quite happy to be on the same level as my right hon. Friend the Prime Minister and with the same allowances, and free of tax, which, if I remember aright, were introduced by a Socialist Prime Minister.

Mrs. Mann: It is still £10.000 a year.

Mr. Remnant: Yes, but the allowances matter in what we call the "take home" money. There is no getting away from that.
The other point I wish to put to the hon. Lady is that we remember many occasions on which it has been suggested that overtime should be free of tax because a man cannot be expected to work overtime when he has to pay additional tax at probably a higher rate. In connection with the £10,000 a year man, I shall assume for the moment that the hon. Lady is capable, as I hope she is, of earning £10,000 a year. Would she be prepared to take on an additional job, which might well mean the employment of 1,000 people, if she would keep only 2s. in the £ of that additional amount?

Mrs. Mann: If the hon. Member gets me the £10,000 a year job, I will tell him.

Mr. Remnant: If the hon. Lady gets the £10,000 a year job, I will get her the extra £1,000 a year job if she will take the extra £1,000 a 2s. in the £.

Mr. Denis Howell: There is no morality over there.

Mr. Nabarro: On a point of order. An hon. Member opposite has just accused my hon. Friends and myself of being immoral. This words were, "There is no morality over there." Is that not a grossly un-Parliamentary comment, Mr. Deputy-Speaker?

Mr. Deputy-Speaker (Sir Gordon Touche): I do not think that it is within the terms of prohibited phrases. I think it is an accusation of a general nature.

Mr. Remnant: I am not offended by it, because I am quite certain that if the hon. Lady could get an earned income of £10,000 a year she would be worth the extra £1,000 a year, of which she would keep 2s. in the £ for herself.
I am sorry that my hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) has left the Chamber, because I wanted to comment on his very wise remarks about the extent of future savings coming from the man or woman who has not, until recent years, been in the habit of saving, or been able to save, and who, I hope, is now able to do so. I am thinking of the man who goes in for the "pools", or for tobacco, or for alcohol, or for one of the other luxuries.


There can be no doubt that if this money could be channelled into investment in industry, the benefit through employment —and I do not confine it to this country —would be very large.
Such a man must, however, be encouraged. In my view, he must be encouraged in two ways. As my hon. Friend suggested, one method is by unit trusts, because he must be satisfied, and rightly so, that if he wants the money he can get it quickly. The other method which might be adopted, perhaps not in the present Bill but in a future Finance Bill, is that the £15 Post Office Savings Bank interest which is allowed free of tax could be increased, so that the first £15 of what I choose to call investment income rather than unearned income could also be free of tax. There could then become that habit to save, if and when it is possible to do so, with considerable benefit to the country and to the Colonies.
I had a slight difference of opinion earlier today with my hon. Friend the Financial Secretary and the right hon. Member for Smethwick (Mr. Gordon Walker). I quite agree with the right hon. Member that the Clauses relating to O.T.C.s, which in my schooldays had another connotation, are extremely difficult to understand. The two points on which we had disagreement are so important that I hope my right hon. Friend will be able to give an absolutely clear answer when he replies to the debate.
It will be remembered that the first point concerned Profits Tax. It may be that I was thinking of a different set-up. What I am thinking of—and here I declare an interest—is a sterling company, registered in the United Kingdom, which has trading operations in India—in, for example, tea—and which has a wholly-owned subsidiary with two estate companies under it in Kenya and in Tanganyika.
Quite obviously, the parent company in the United Kingdom becomes an overseas trade corporation, and its profits from its activities in India get the benefit of these Clauses. But Africa is different, because although those companies are in the early stages of development and there are, therefore, unlikely to be any profits to be remitted to this country for perhaps seven or eight years, if those profits are to be remitted it can be done

only by way of dividend paid by the holding company registered in Kenya and wholly owned by the United Kingdom company.
It is done in that way because, although the estate companies were in not a very good state financially, they were ripe for development, and the benefit to those Colonies of a company registered there is much appreciated, even when it is known that it is backed by, shall I say, a reputable United Kingdom company; but the dividend declared by the East African company to the parent company in the United Kingdom will, as I read Clause 32, be investment income and not trading income.
The Financial Secretary may say, "Yes, but you have an alternative". I agree. I can either wind up the companies so that the assets are owned by the United Kingdom company, or I can transfer the registration from Kenya and Tanganyika to the United Kingdom, but if the trading results are the development of our Colonies, why should the companies be put to that expense? No doubt my hon. Friend has other cases in mind, and I would welcome the opportunity of having a talk with him about this before the Committee stage of the Bill is reached. In my particular instance, at least, I think that there is no difference between the operations in East Africa and in India.
Perhaps I may now briefly mention two old friends of ours which I am sorry not to see in the Finance Bill. One is the post-war credits. After all, the war has been over for twelve years, and though the date of redemption was not defined at the time, I think that most of those who have these credits have expected them to be repaid before now. I am not suggesting that the whole of the amount could be paid off at the moment, but certain holders of these credits are undoubtedly suffering inconvenience and hardship because they cannot get at them. Therefore, while it is all to the good if the period in which they can be repaid is reduced, that does not answer the problem entirely.
There are two or three ways in which they could be dealt with. For instance, they could be accepted in payment of tax due. Again, as my hon. Friend the Member for Dover (Mr. Arbuthnot) has suggested on a number of occasions,


stock could be issued for the amount, and would be available for the holder to sell if he so wished, but I am not quite in agreement with my hon. Friend because I think that that means a liability for the life of the stock issued. I would prefer the issue of a certificate maturing at the present date, which, like certain life assurance policies, could be sold on the market if the money was needed, but, because of the difficulty of selling, such a scheme would stop many people from cashing in on it who did not need it.
The other old friend is Easter offerings. Perhaps I am freer to talk, as the vicar of my parish emigrated to Tasmania just over a month ago and is now out of reach of the Inland Revenue. Tax on Easter offerings can so easily be avoided —and, I make bold to say, is avoided. After all, it comes down to this, that whether one puts in to the Easter Sunday offering a cheque, cash, silver, or copper, the vicar is bound to return it and to pay tax on it—if he is an honest man, as I assume vicars are.
If, on the other hand, I choose to give him something at Whitsun or at Christmas then, unless he is over-conscientious, he is not bound, except in the eyes of the Inland Revenue I suspect, to return that amount as part of his income. He can take it as a gift. I suggest, therefore, that the amount lost to the Inland Revenue from such a concession to a body of long-suffering men, who are expected to live at a standard well above their income, would be very small, and would receive general approval.
I believe that my right hon. Friend the Chancellor of the Exchequer is right, if I interpret his actions correctly, to be selective about investment allowances. There may be Amendments in Committee suggesting that the allowances should be spread further. If need be, I can add to them. I may be old-fashioned, but I feel that industry ought to be able to finance its own replacements and, perhaps, certain small extensions out of its own resources. It has been unable to do that of recent years because of the high rates of tax, the high rate of Profits Tax—and particularly the Profits Tax on undistributed profits.
I would suggest that, while the Chancellor should keep investment allowances

in his hand to be applied to industries particularly in need of them, if he could see his way to grant, in another year, a reduction in undistributed Profits Tax he would be entitled to expect industry to look after most of its own replacements. That view will not receive general acceptance, but it is my view.
Shipping is one industry where the increased allowance has met with general approval. I can name another in which I have an interest—the hotel industry. Often enough—in fact, too often—do we read criticisms of the standard of service of accommodation and of fare provided by our hotels. In many cases those criticisms are justified, but it must be remembered that when the hotel was first erected it was modern, and that, under the Income Tax rules correctly applied, anything that is not a specific replacement is treated as capital. In fact, modernisation expenditure lasts for an incredibly short time. I have one company which, because of its chase to keep pace, has not paid an ordinary dividend for a long time.
It should also be remembered that much of that modernisation expenditure does not enable the hotel to make extra charges. They are expected by the visitors, and rightly so. To take one small item, a plug for an electric razor costs £3 and has just come down from £4 10s. If one has an hotel with 100 rooms, there is £300 out of the net taxed income for this purpose, and this is a trade which is bringing millions of dollars to this country. I know that a memorandum has been submitted to the Chancellor on this subject, and I suggest that this is quite a good example of the way in which the selective application of investment allowances could be applied.
I have occupied more than my fait time, and I would like to end by congratulating my right hon. Friend on his intentions towards the overseas trade corporations. I say intentions, because I am not convinced that I fully understand the wording of his Clauses; but I am quite certain that they are right and that they will be for the benefit of this country. I think that any appeal by him or by those interested that the benefits should, if possible, be ploughed back to further exports within the Commonwealth, should receive the backing of all right minded people.

8.1 p.m.

Mr. Roy Jenkins (Birmingham, Stech-ford): I want to speak for only three minutes and to make one specific point, and I must therefore resist the temptation—not actually a very acute one—to follow up, in my remarks, what the hon. Member for Wokingham (Mr. Remnant) has said.
The background to our general discussion on the Finance Bill is always the general state of the economy, and one of the factors in this consideration this year is the Committee which the Chancellor has just appointed to look into our monetary and credit system. In principle, I should have given a mild welcome to the proposal for such a Committee, but I must say that my welcome is a good deal modified as a result of the Committee which the Chancellor has actually appointed. The Committee gives the appearance of being an impartial body such as might reasonably deliberate upon this matter, but I think that the question is much more one of appearance than of fact.
Of the nine members of this Committee there are only three who might be regarded as at all likely in advance to take a point of view critical of the established order. They are confined to one economist and two trade unionists, but, in addition, this is a case in which one suspects that the majority of those on the other side are in fact a good deal more expert on the subject of this Committee's inquiries and have been applying their minds far more continuously to these matters than have the minority. The economist, who might be regarded as a Left-wing representative, is much more an economic historian than a general theorist and, certainly, more than he is a specialist in monetary and banking affairs.
In addition to this lack of impartiality in the composition of the Committee, it is a generally rather disappointing and unadventurous Committee of not strikingly high calibre, and certainly not of the standard of the Macmillan Committee of 1930–31, with which one is automatically tempted to compare it. There is certainly no Keynes and certainly no Bevin on this present Committee. It might be said that there is no Keynes in the country today, and that is perfectly true, but I can think of at least four or

five economists who come a great deal nearer to being a modern substitute for Keynes than anybody appointed to this Committee. I think, therefore, that we are not likely to get a questing, adventurous approach from the Committee.
Let me take one question which I put forward as possibly a test. One of the matters to which I think the Committee should apply itself extremely closely is whether in present circumstances there is any useful function for the London Discount Market. I would be extremely doubtful whether this Committee, as it is at present constituted, would in fact apply itself to this question in a detailed, questioning, and slightly aggressive manner, as I think it should. Therefore, with some regret, I must express for my own part my dissatisfaction with this Committee as it is constituted at present. I hope I may be wrong, but I will hazard the guess that what we will get from this Committee is the rather conventional and probably unanimous report generally favourable to exactly what the Chancellor of the Exchequer would like it to be favourable to.
It might be thought that to get a unanimous report from a Committee must be a good thing. I do not think that it is always necessarily a good thing by any means, because I think that matters of high policy should not be settled by committees, even by committees a good deal more distinguished than this one. Nobody would think of setting up a committee to pronounce upon foreign policy.
Also, when we are dealing with matters of finance such as this committee will necessarily be dealing with, there is a good deal to be said for not trying to have necessarily a unanimous report, and that it is much better to have two opposing points of view sharply argued, and, perhaps, to have the committee presenting both majority and minority reports, with new facts and arguments to put before the House, on which to reach a decision, in something like the way in which the Royal Commission on the Taxation of Profits and Income did.
That, I think, we shall not have; and I am afraid that the Chancellor, with no desire to do that, but perhaps on the advice of the Bank of England or perhaps on the advice of the Treasury, has in fact produced a Committee which, while it gives a superficial air of impartiality,


could not be more nicely calculated to produce exactly the sort of answer that he would like to have. Therefore, I must say in advance that I shall be extremely sceptical of the report that comes from it, and I shall certainly not regard it as giving the final pronouncement, which we must accept, on these important matters.

8.6 p.m.

Mr. Raymond Gower: The very calm and quiescent atmosphere of this debate is itself perhaps a compliment to my right hon. Friend's "room at the top" Budget. I well recall that that particular description seemed to arouse some criticism from the benches opposite, based on the fears that, in attending to the broad needs of the economy, my right hon. Friend may have been tempted, or may have failed to do something for those at the bottom, and that is a reasonable anxiety.
I am quite convinced, however, that my right hon. Friend will not fail in that respect, any more than his immediate predecessors at the Treasury have done. When we consider how in recent years so many people have been progressively taken out of the liability of having to pay Income Tax at all, how family allowances have been twice increased, and how National Insurance and other benefits have been progressively increased, we cannot for a moment agree that the Chancellor has not had in mind those people who are at the bottom.

Mr. Joseph Slater: Do not forget the increased contributions.

Mr. Gower: I realise that there has been an increase in the contributions, but the hon. Member will recognise that these increased contributions were the natural corollary and consequence of the kind of legislation passed by his own Government.
It was implicit in and implied by that scheme that there should be some increase in contributions when the benefits went up. Indeed, with the increasing age of our population, it is hardly conceivable that we can have large-scale progressive increases in benefits without some increase in contributions, unless we are prepared to contemplate a very large-scale increase in direct and indirect taxation, and, possibly, the bringing back into the Income Tax range of many people who do not now pay tax.
The general tone of my right hon. Friend's Budget speech, in introducing the proposals embodied in this Bill, seemed to arouse a little amusement opposite, and I well recall the howl which we heard when he did a most healthy and salutary thing in reminding this House of something which we all tend to forget. It is that the State and the Treasury have no absolute right to make first claim on a person's income.
In these days, we are tempted to feel that a taxpayer is privileged to enjoy the little which may be left after the Treasury have had their share, but my right hon. Friend did a healthy thing in reminding us that that is the reverse of the view which we should take and that it was the earnest desire of Chancellors long departed, about whom we are sometimes reminded, to allow money to fructify in the pockets of the people. Precious little has been left to fructify in anybody's pockets in recent years.
I approve of the Chancellor's steps to end the somewhat abrupt transition from Income Tax to Surtax income, but, like the hon. Member for Huddersfield, West (Mr. Wade), I believe that persons just below the Surtax income are worthy of particular notice in future Budgets.
Several hon. Members have referred to the old-age pensioners, and I know that my right hon. Friend the Minister of Pensions and National Insurance has their position very much in mind. It may be that soon or in the foreseeable future he will bring to the House proposals for a general increase in their pensions.

Mr. Marcus Lipton: Just before the next Election.

Mr. Gower: I will not argue with the hon. Member about the date, but I expect that my right hon. Friend will bring such proposals to the House reasonably soon, and I suggest to the Economic Secretary, who is present, that he should convey to my right hon. Friend that it might be fruitful if the Government also considered the possibility in the future of meeting this tremendous problem of National Insurance benefits by giving an extra increase to the older of the pensioners in addition to the general increase which might take place. The needs of old people tend to increase with advancing age and their ability to earn anything above their pension similarly decreases with advancing age. It is my


personal view that as the years go by and the age of our population and the number of old people increases, we shall have to consider action along these lines. I hope that the Government will give attention to the possibility of an extra increase for some of the older pensioners, even if it means a slight departure from the strict insurance principle.
My hon. Friend the Member for Wokingham (Mr. Remnant) referred to post-war credits. I should have thought that a definite date could now be fixed for their repayment, even if it is at a considerable time in the future, and that they should be made negotiable. By this method there would be no immediate increased expenditure to the Treasury, but there would be the possibility of some needy persons using these documents if they wanted to avail themselves of them immediately.

Mr. Bence: Convert them to bearer bonds.

Mr. Gower: They might even be converted to some form of industrial security.
Side by side with that, I suggest to my hon. Friend the Economic Secretary that the Government might consider the institution of a new system of industrial bonds tied to our plans for the future for developing such industries as atomic energy and some of our other newer industries. This would surely appeal to the small investor and would have the added advantage that it would be dramatic and would be geared to the needs of the country.
I plead with the Government once again to consider the anomaly which exists in respect of those people who, because they are employed, do not qualify for Income Tax allowances for books, periodicals, journals and professional magazines which they reasonably require. It is an anomaly which affects persons as dissimilar as school teachers, parsons and doctors employed in hospitals.

Mr. Gordon Walker: And Members of Parliament.

Mr. Gower: I submit to the House that it is absurd that whereas an accountant, a solicitor in private practice, and many other people can obtain allowances of this kind simply because they are taxed

under one schedule heading, other people, whose need of professional journals and books is just as great in order that they may keep themselves abreast of recent events, can get no relief at all because they are taxed under another schedule. This is a reform which hon. Members have sought for some time.
Finally, I want to make a special plea in respect of firms which introduce forms of profit sharing and co-partnership. Some years ago I had the honour to introduce in the House a Motion, in very moderate terms, which merely called upon the previous Government to acquaint themselves with information about the amount of co-partnership and profit sharing schemes which exists in this country. At that time I did not deem it opportune or appropriate to introduce a Motion calling for special financial incentives, for I was by no means satisfied that I would carry a large body of opinion with me.
I knew at that time that there were hon. Members opposite who, despite the excellent performance of the Co-operative movement in this respect, had some apprehension that these schemes might be used as means to weaken the free bargaining of trade unions—which I believe to be completely fallacious—and that on this side of the Committee there was some apprehension because some people had advocated forms of compulsion which are quite inappropriate in cases of profit sharing or co-partnership, which should come as a corollary to and not prior to the institution of good industrial relations.
We have now had a few years' experience of these schemes and have seen them gradually extended to many different forms of industry. While the benefits should not be exaggerated. I am convinced that, generally, the effect has been excellent. In many cases, it has created a far different atmosphere. If we want to find a new dynamic—and we certainly do—here is one source which we might explore. Forms of co-partnership and profit sharing have been introduced in industries as dissimilar as the chocolate industry, some forms of engineering and the cement industry, and I do not think that the principle is limited by the kind of industry and business which is carried on.
I feel that the time is now opportune to do more than merely remove obstacles


to the introduction of these schemes and to do more than merely acquaint ourselves more fully with information about them. I submit that there is now a reasonable case for a Government to give positive financial incentive to firms which proceed in this way. It may be said that this would be an unfair thing to do, but I submit that there are respectable precedents. Successive Governments have given positive incentives to firms and companies which have introduced pensions schemes—I think rightly. It is just as reasonable that such incentive should be given to firms which introduce schemes of profit sharing and co-partnership.
I do not suggest that because a firm introduces a scheme of this kind it thereby achieves a revolution of good relationships in its shops. I do not think that for a moment. I do not think that the institution of these schemes means that production will increase immensely and suddenly, but these schemes are usually accompanied by other good things, such as the payment of the best wages negotiated freely with the trade unions, the full recognition of the appropriate trade unions, the observation of the best methods of safety in factories, efficiency of production, and the institution of sickness and injury benefits.
Al these things are found, customarily in firms which institute these schemes. I submit, therefore, that there is a reasonable case for this suggestion and I respectfully give notice that I shall seek the opportunity to put forward appropriate Amendments for discussion in Committee. I sincerely hope that the House will consider the advantages of what I have advocated tonight.

8.21 p.m.

Mr. Charles Pannell: I shall not try to follow the remarks of the hon. Member for Barry (Mr. Gower). When he addresses the House he usually reveals himself as a master of all the elementary virtues, but I think that he drew the wrong moral when he recalled that the Chancellor of the Exchequer referred to this as the "room at the top" Budget. I wondered what the right hon. Gentleman meant at the time. I thought that he had in his mind the best-selling topical novel of that name, which I understand from my reading of it was the story of a young man who pushed his way through anything without regard for other people.

I really could not understand the Chancellor's praise for his own Budget when he was referring to that.
Earlier in the debate the hon. Member for Somerset, North (Mr. Leather) referred to the emigration figures, but he did not say that they reached their peak at the time of this country's humiliation over Suez. It was the social climate of the country, the idea that we had lowered ourselves in certain standards, that led to that emigration. It was a form of escapism. When one has questioned a good many people who decided to emigrate, one finds that it is this mood that they wanted to go abroad.
I should advise the hon. Member and others to remember what my right hon. Friend the Member for Ebbw Vale (Mr. Bevan) said when he urged that we really must consider making this country great in other things. At that time it was not the taxation in the country that was driving people abroad. My hon. Friend the Member for Coatbridge and Airdrie (Mrs. Mann) made a relevant point when she said that it was the people on the £1,000 a year mark who went abroad and not the people with a £3,000 or £5,000 a year income. They did not feel any inclination to get out of the country.
I want to express in the closing minutes of the debate some opposition to the whole basis of the Bill. I want to know what will be its impact on the suspended wage claim in the engineering industry. That is far more important than its effect on a few Surtax payers. People may talk about the relatively few Surtax payers, but there is no question that it is on the "know how" and good will of the craftsmen in the engineering industry that in the main the country depends—and I do not ignore the fact that the technicians and managers have their claim.
The craftsmen in the engineering industry have made considerable sacrifices for fair shares all round. When I went into the engineering industry about 1916 the labourer's rate was about 55 per cent, of the craftsmen's 100 per cent. Now, in many cases, the labourer has achieved 87 per cent, of the craftesmen's rate, and throughout the country the differential between the skilled journeyman fitter and the labourer is only £1 to 25s. a week.
In the main, the engineers have not moaned about that. It is one of the


things to be put to the credit of the craftsmen's unions that they have taken fixed increments over the years which have lowered that differential. They have seen that there must be a foundation, a minimum rate below which an unskilled labourer should not fall. I have never heard in my life the idea voiced by a boy entering his apprenticeship that his differential would not be good enough at the top, though he would have had a considerable case for saying so. We should be concerned about the craftsmen of the engineering industry today.
The recent Report of the Inquiry into the strike in the engineering industry states:
 The present minimum time-rate for skilled labour—168s. 4d. per week—was agreed between the parties in February, 1956.
That is the basic rate, and it is all very well for the employers to say, "What are the earnings?" The executive never considers that. He considers what he receives as a fixed sum. The civil servant, the sedentary worker and the staff man consider their weekly, monthly or annual pay in relation to fixed hours. It is completely unfair to the craftsmen in the engineering trade, who are working long hours under considerable pressure, that they should have that figure of total earnings quoted against them. After all, that figure is a compensatory figure for loss of leisure, and it is reasonable for them to ask "What do we get for a 44-hour week."
We have seen the harvest of that kind of talk, because the engineers at their national conference are asking for a 40-hour week. When I was in the United States last year I found the engineers asking for a 35-hour week. The demand for a shorter working week will be one of the issues which we shall have to face when automation comes. If there is such a demand it will be largely the harvest of the talk by employers and all sorts of people who have quoted average earnings against the engineer.
It might also be said that the inquiry which was made has completely vindicated the leadership of their unions in the recent strike. It might be remembered that it was the failure to negotiate, the refusal of the employers to make an offer, that caused the strike to take place. The trade unions themselves have claimed

recently that they have been completely vindicated. It was this basic refusal to negotiate, to recognise the rights of the trade unions, that brought on the trouble.
Let us face the concept of this Budget, which in the main has given something to the Surtax payers, the Income Tax payers, and the older people—even pensioners—who come within the Income Tax range, while all who fall below the general level of Income Tax have been left out. Consequently to the engineers, or to anyone else looking at this Budget, hon. Gentlemen on the other side of the House are generally considered to be the natural allies of the employers in the eyes of the great trade union movement of this country. Not only that, but they are generally looked on as the traditional enemies of the trade union movement.

Mr. Nabarro: Drivel.

Mr. Pannell: It is no use the hon. Member for Kidderminster (Mr. Nabarro) saying "drivel." We know that his head is full of that. All that the other side of the House can produce is the hon. Member for Totnes (Mr. Mawby) as a kind of apostate member of the Electrical Trades Union, somehow transferred from the Midlands down to Totnes, a stag-hunting constituency, where there is little industry. They produce him and say, "Look, we have produced somebody from the trade union movement."

Mr. J. A. Sparks: There are no stags at Totnes, only foxes.

Mr. Pannell: My hon. Friend says there are no stags at Totnes, only foxes.

Mr. Bence: Tory foxes.

Mr. Pannell: At any rate they have adopted one trade union member on the benches opposite. It is only necessary to read the headings of the Finance Bill to know that this is a Tory Budget, which is meant to be received with gratitude by the allies and friends of the Tory Party. It is not likely to deceive anyone in the country. Hon. Gentlemen opposite realise that they have reached the point of no return. The results at North Lewisham, Carmarthen, and all the rest are a set style of what will happen in the future. Hon. and right hon. Gentlemen opposite know that they are on their way out, and they will probably do as much as they can for their friends


before they go. The hon. Member for Hornchurch (Mr. Lagden) came in by accident at the last Election—

Mr. Godfrey Lagden: Since the hon. Gentleman has mentioned me, may I point out that it was no accident? It was the desire of the greatest number of people in that constituency who had a vote. I have no doubt that their desire will continue, especially after they have read the speech of the hon. Gentleman, which has been described by my hon. Friend the Member for Kidderminster (Mr. Nabarro).

Mr. Pannell: I have suffered from reading one or two of the hon. Gentleman's speeches, and if he will consult any of his friends privately they will confirm the impression on our side of the House that he is not even among the bright boys opposite.

Mr. Deputy-Speaker (Sir Gordon Touche): Order, order. I think we are getting away from the Finance Bill.

Mr. Pannell: With great respect, Mr. Deputy-Speaker, when anyone makes a reflection on the type of speech I am making, I answer it. I only took up the hon. Gentleman because I heard an alcoholic laugh on the other side of the House.

Mr. Nabarro: I do not want the hon. Gentleman to think that I suggested that all his speech was drivel. I interpolated the word "drivel" at the point when he said that members of the Tory party were the enemies of the trade unions.

Mr. Pannell: To correct the hon. Gentleman, I would point out that what I said was that the great body of trade unionists in this country look upon hon. Gentlemen opposite as the natural allies of the employers and as the traditional enemies of the trade union movement.

Mr. Nabarro: I agree that the hon. Gentleman said that later, but at the point where I interpolated the word "drivel" it was immediately followed by the statement that the Conservative parties were the enemies of the trade unions.

Mr. Pannell: The hon. Gentleman interrupts me so many times on irrelevancies that he may not be able to make his own speech, and I should not like to stop it by any loquacity on my part.
I want to refer to an aspect of Purchase Tax on which I may be nearer to the view of hon. Gentlemen opposite. I have always argued, and sometimes against the opinion of my hon. Friends, that I know of no good reasons for the remission of Purchase Tax on motor cars, especially in the present state of the roads. Still I cannot understand why Purchase Tax remains on commercial vehicles, and why they should attract this tax at the rate of 33⅓ per cent. It seems to me to be almost the only type of capital equipment that is taxed. This seems to spring from a general muddle-headedness and misunderstanding about what a commercial vehicle is. It would be almost as sensible to tax a lathe, milling machine, universal grinder, capstan lathe or any of the other capital equipment of the engineering industry.
It is one of the curious things about this country that we often upbraid shop stewards and suggest that they are not co-operative, but day by day they are doing time-and-motion study and agreeing with employers about improvements. We never hear about these things. We merely hear about upsets at Briggs's works from time to time. Yet shop stewards are working in the engineering industry to save seconds and minutes on the factory floor.
However, in respect of the lorry on the road we are completely restrictionist in our outlook. We say that the production of goods shall be streamlined and that they shall be produced at the lowest possible cost, but when the goods leave the factory, sometimes to go to another factory or to go to a port, our whole outlook is restrictionist. I can understand the general view of people brought up on the railways, for their minds always have moved in a permanent way, but I really wonder why we approach what is, in effect, the conveyor belt of industry in the way that we do.
When bottlenecks occur in production we do everything possible to remove them. Yet when we have hold-ups on the roads we do not say, as sensible people should say, "Improve the roads and let the vehicles go through". We merely say "Take the goods off the road. Send them by slower transport. Put them on the rail. Tax the road transport." Our attitude towards the commercial vehicle industry is ridiculous.

Mr. Chapman: I am sure my hon. Friend will agree that it is not an easy problem. I think that what he says is right, but does he not agree that there is the difficulty that if we had no Purchase Tax at all on the very small light van it would become almost interchangeable with the small light car? If that were so, a great many small light vans would be bought for private purposes, and so they would not go abroad as exports. The great problem is that there is not a clear distinction between the commercial vehicle and the private vehicle.

Mr. Pannell: If I may say so without offence to my hon. Friend, that is the difference between an economist talking about an engineering subject and an engineer talking on a subject about which he knows something. The history of Purchase Tax will give my hon. Friend the answer. Public service passenger vehicles have always been exempt from Purchase Tax. Vehicles of not less than 3 tons unladen weight were free of tax until 1st July, 1950, when the chassis tax became operative. Why was that? It was the silly nonsense about the 20 m.p.h. speed limit. The purpose was to give some compensation vis-à-vis vehicles of under 3 tons which were allowed to travel at 30 m.p.h., and it was done by means of a reduction in tax. The 20 m.p.h. speed limit is now being lifted and all vehicles can travel at 30 m.p.h. The tax is completely regressive and ought to be removed.
On 31st August, 1956, there were 1,198,000 goods vehicles in this country as against 3,835,300 motor cars. Those are interesting figures. These are days when there is a great deal of death on the roads; and we also have a great need to export motor vehicles. We must think of the commercial vehicle industry as providing an element in production representing a capital asset to the company concerned. It is about time that we completely removed the tax from commercial vehicles and then, by also providing decent roads for the commercial vehicles to run on, we shall substantially lower the cost of the transport of goods throughout the country.
What I said at the beginning of my speech, and would like to say to the Chancellor now that he is in his place, follows very much the line of the speech

made on the Budget of my hon. Friend the Member for Sowerby (Mr. Houghton) who, I understand, is winding up for the Opposition tonight. My main indictment against the Budget is that whatever there may be in its individual economies, all of which can be justified individually, those economies are wrong in their context and their timing.
I am still wondering what effect the Budget is going to have on the suspended wage claim and the deferred judgment of the engineers arising from that wage claim and from the proposals of the engineering inquiry. In the last few days, the National Committee of the A.E.U. has been meeting at Eastbourne. Only those who are part and parcel of that organisation, which is the leading one in the industry, will know the sort of struggle that is going on by highly responsible men within it for leadership. I say that when the very able president of that union, Mr. Carron, faces his task, he is not helped but considerably hindered by this sort of Budget.

8.42 p.m.

Mr. Gerald Nabarro (Kidderminster): I wish to congratulate my hon. Friend the Financial Secretary on the very lucid and expeditious fashion in which he moved the Second Reading of the Finance Bill this afternoon. It may be a Finance Bill of average length, but it seems to me to be of above average complexity. I thought that in his general explanations my hon. Friend left no possible doubt as to the meaning of the majority of the Clauses with, perhaps, a single exception regarding the lengthy Clauses dealing with the overseas trading tax reliefs for companies which can, no doubt, be examined in much greater detail during the Committee stage.
My right hon. Friend the Chancellor has spread his £98 million of tax reliefs this year and his projected £130 million of tax reliefs in a full year over a very wide field. In a speech which I made during the Budget debate, I dealt with a number of aspects of my right hon. Friend's proposals, and this evening I intend to confine myself, firstly, very shortly to his proposals in regard to Surtax, secondly, to his proposals in regard to the investment allowance for ships, and, more fully, to his proposals in connection with Purchase Tax.
There were heated exchanges between the hon. Member for Northfield (Mr. Chapman) and my hon. Friend the Member for Somerset, North (Mr. Leather) and myself on the question of the amount of money which my right hon. Friend was allocating to Surtax relief in relation to the total sum of taxation relief given in the Budget. I think that the hon. Gentleman misunderstood me in the course of my intervention. My reference to 10 per cent, of the whole relief was specifically in respect of that allowance for Surtax. Of course, the fact is that in a full year there is a sum of £9¾ million for personal allowances for Surtax in the form of relief, to which must be added £24½ million for earned income relief, making a total of £34¼ million in a full year out of £130 million in all. That, I calculate, is a shade less than 25 per cent., and is a very different thing from the hon. Gentleman's statement, which all my hon. Friends and I noted so carefully at the time, when he referred to the whole of the relief available being given to the Surtax payer. In fact, it is slightly less than 25 per cent.
Party politics on one side, these are facts; my right hon. Friend said on 9th April, in reference to this Surtax relief:
 In few countries in the world is there less incentive to increase effort after the £2,000 has been passed."—[OFFICIAL REPORT, 9th April, 1957; Vol. 568, c. 999.]
I want to talk about that for a moment, because it seems to me that it is a mistaken argument to say that the reason for the Surtax reliefs is the fact that we wish to stem the flow of emigrants to countries which offer greater incentive to the scientific or technical worker, or to those in the higher executive branches of industry. That is not the case. It is a matter of competitiveness.
In exactly the same way as we are obliged in a highly competitive world to match our techniques and our professional skills with the older industrial countries of Western Europe and with the newer industrial countries of North America, so it is vital, if the industrial economy of this country is to expand, that the competitiveness of the salaries which we are able to pay to those men who have the brains to occupy high executive posts in industry should match the scales of salaries, after taxation, which are available to them in the countries which are

our principal industrial competitors. That is the fact of the matter, and I am sure that even a Socialist, who must surely subscribe to the view that this nation should steadily expand its industrial economy year by year, cannot controvert that simple fact.
What was the position before my right hon. Friend introduced his Budget? I have not selected my countries at random, and I have not taken examples which suit my argument best. I have taken two industrial countries in Western Europe, namely, Western Germany and France, and two industrial countries in North America, namely, the United States and Canada. I have taken various income levels above £2,000 per annum and compared what a man has left after payment of tax in this country with what he has left in those four comparative circumstances. These are the figures: A married man with two children, earning £3,000 a year in this country has left £2,051; in Canada, £2,583; in the United States, £2,556; in Western Germany, £2,085; in France, £2,667. In the four competitive countries there is an average net income 25 per cent, higher than is available to the man in this country.

Mr. Bence: That is only after Income Tax. The hon. Member should be fair about these figures. I have seen them for myself. These are incomes left after direct taxation, but in the United States of America sales tax is so heavy that that income, when used as purchasing power, is smaller than it appears.

Mr. Nabarro: I do not accept that argument for a moment, but I am talking about direct taxation and the combined incidence of Income Tax and Surtax. The figures I quoted were for people who earned an income of £3,000.
I now quote the figures for an earned income of £5,000. Before the Budget an earner in this country would have left £2,801; in Canada, £3,985; in the United States, £4,065; in West Germany, £3,155; in France, £4,125. In other words, at that income level of earned income the residual after payment of Surtax and Income Tax is much greater, at the £5,000 level of gross income in the four principal countries which compete with Great Britain industrially. The source of these figures is the Financial Times of 23rd February, 1957, well


before the Budget. I have confirmed them from other sources, and I do not believe that they are inaccurate in any regard.
In reply specifically to the point made by the hon. Member for Dunbartonshire, East (Mr. Bence), I agree that it is true that in those four countries there are variations in indirect taxation, but it is absolutely indisputable that the level of indirect taxation in this country is also higher than it is in those other four.

Mr. Chapman: indicated assent.

Mr. Nabarro: I am glad to see that the hon. Member for Northfield so readily agrees with me. This means that, in the aggregation of direct and indirect taxation, we are still the most highly taxed nation in the world.
It is upon those grounds of competitiveness in the higher executive ranks of industry, and among technologists and scientists, that I congratulate my right hon. Friend upon the objective measures which he took to relieve Surtax payers in the face of what may be—if it is not already—gross misrepresentation from political parties which in their respective philosophies normally be opposed to that of the Tory Party. He has taken the right step. Although it may be misrepresented I feel sure that in the long run it will pay him the dividends that he so richly deserves.
I now want to say a word about shipping. I was asking my right hon. Friend Parliamentary Questions referring to that matter long before the Budget statement, and in recent years we have been associated with each other in many debates which included the question of "flags of convenience" and the extraordinary tax advantages which are now enjoyed by countries such as Panama, Honduras and Liberia, where practically no tax at all is paid by shipping. It is true that in the case of Liberia and others there is a registration fee amounting to no more than 3 per cent, or 4 per cent., but little or no taxation is paid on the profits.
In the face of more than 50 per cent, of the profits of our shipping companies being taken in direct United Kingdom taxation it would have been impossible for British shipping lines to continue to compete had not some unilateral action by way of relief been taken by my right

hon. Friend in this or some other form. I wrote down the Financial Secretary's words in connection with this matter, which I thought were well chosen.

Mr. James Callaghan: Give him a prize.

Mr. Nabarro: I always give prizes to those of my hon. Friends who present constructive arguments. On this occasion the Financial Secretary said:
 such a concession "—
that is, the double investment allowance concession—
will not meet those who argue for depreciation on some new basis altogether. But it does represent a notable further aid to an industry which, as I have explained, is at a special competitive disadvantage.
He was using those words in connection with "flags of convenience."
I would not quarrel with my hon. Friend in any way in his statement that this double investment allowance is an important advantage, given at a critical moment in the history of our shipping lines and the shipbuilding industry, but in my view it is only a palliative. It is admittedly a very acceptable one for the time being, but it cannot solve the long-term problem.
As those versed in Income Tax matters will readily know, its advantage is that over the length of life of the asset, namely, the ship, and up to the point of scrapping it, the owner will receive £140 for each £100 invested. A point of view which has not been represented before—I have asked about this and checked it with half a dozen accountants, in order to make sure that I should not be misled, because it is a very complicated matter—is that it is also a hedge against inflation during the life of the asset, and in that respect it is important. But it is no long-term settlement.
It still means that British ships will have to compete over the years with ships, operating under flags of convenience, which are paying practically no taxation on profits from their earnings on the high seas. I fully recognise that, with this new dispensation under the Finance Bill, ships can be written off on a reducing balance basis over as little as eight years. The period varies with dry cargo ships compared with tankers, etc. But I should like to say to my right hon. Friend— I am sure he does not regard this as a


permanent settlement—that what the shipping lines—I have consulted several of them—appear to be worried about is the possible lack of permanency of this 40 per cent, investment allowance.
Does my right hon. Friend recall—I am sure he must do—the history of capital allowances since the war? They have been up and down—the initial allowance and latterly the investment allowance. The initial allowance has varied between nothing and 40 per cent Investment allowances were put on in one year and removed the next. Now there is a special allowance of 40 per cent, for ships, and the shipping lines are a little, I will not say afraid—a little apprehensive—about the fact that there may be no lengthy duration of this 40 per cent, investment allowance; but that in two years time, if the economic climate has changed, it may be reduced to half the present level or abolished altogether.
That is why I have said to my right hon. Friend, both in corespondence and in an earlier Budget speech, that I should like him to have some regard to the alternative practised in the United States and referred to earlier today by my hon. Friend the Member for Stafford and Stone (Mr. H. Fraser) whereby, if an asset of the class of a steamship, tanker or dry cargo vessel, were regarded as a national asset of the first importance it would have a special depreciation allowance at standardised rate applied to it. In the case of ships I think the duration of the write-off should be five years at the rate of 20 per cent, per annum—

Mr. A. J. Champion: Phew.

Mr. Nabarro: Did the hon. Gentleman whistle? I am not sure why he should whistle at me but, Mr. Deputy-Speaker, I think he was grossly out of order in doing so. I think he did so because he was surprised when I said five years—the hon. Gentleman nods his head, and so I suppose he was.
But we can make a comparison. I make this comparison, which I put to my right hon. Friend the Chancellor as well as to hon. Members opposite. If a business firm buys a motor car—as so many firms do—for the purpose of running its visitors to and from the local railway station, it can get a 20 per cent, depreciation allowance annually and is

allowed to write it off over five years. Is it really reasonable that a ship, which is infinitely more important, should be placed on such disadvantageous terms compared with a motor car, which is relatively unimportant?
Of course, the Income Tax Law says that the period for which an asset shall be depreciated shall be the length of life of the asset, but nobody can say that the length of life of a Rolls-Royce motor car or even of an Austin A35 motor car is only five years. In fact the period is an elastic one, and subject to negotiation between the owner of the asset and the Inland Revenue. I commend to my right hon. Friend—though not for immediate application, as he cannot bind future Governments as to the lentgh of period of the 40 per cent, investment allowance for ships—to consider this alternative basis which finds a precedent in American practice and which I believe to be a preferable alternative under present circumstances.
I wish to say something about Clause 6; first, to thank my right hon. Friend for the unilateral Purchase Tax relief which he has given in respect of floor coverings, particularly carpets—

Mrs. Mann: Which has not been passed on to the public.

Mr. Nabarro: Did the hon. Lady wish to say something?

Mrs. Mann: I wish to say that it has not been passed on to the public.

Mr. Nabarro: The hon. Lady is so ill-versed in these matters. She never reads the advertisements of the co-operative societies. For example, the cooperative societies have been saying in their advertisements recently, "The Chancellor's reduction of 15 per cent, in Purchase Tax on carpets and rugs available at your co-operative society's store now." But the hon. Lady never read that.

Mrs. Mann: They are the only decent trading people who have passed it on.

Mr. Nabarro: On the contrary. I represent the principal carpet manufacturing constituency in this country, and one of the first inquiries I made was as to the rapidity with which this important relief would be passed on. In practically every case I checked it had already been passed on to the consuming public. I do


not believe that in a competitive society of this kind, with all the carpet retailers fully stocked with carpets and rugs, it would be possible for any single firm to keep the Purchase Tax at the higher level if it wished successfully to sell its goods in competition with a shop down the road.

Mrs. Mann: Has the hon. Member not notice the intimation that it is intended to impose an increase very soon?

Mr. Nabarro: The hon. Lady once again is many weeks or months out of date. In fact the announcement in regard to the increase in the price of carpets at the rate of 5 per cent, was made two months ago and is now ancient history.
I want to pass from the message of thanks to the Chancellor of the Exchequer about carpets to two important aspects of Purchase Tax, both of which are omissions from the Budget. The first was referred to by the hon. Gentleman the Member for Leeds, West (Mr. C. Pannell). I commend to my right hon. Friend the occasion when he led the Tory opposition in this House on the 15th June, 1950, in the onslaught on Sir Stafford Cripps's Budget of that year. He was in company with Mr. Oliver Lyttelton, now Lord Chandos, the present Economic Secretary to the Treasury, the present Financial Secretary and myself and a large number of other Tory spokesmen. We all launched an onslaught on Sir Stafford Cripps and said that it was iniquitous that Purchase Tax should be applied to the chassis of commercial goods road vehicles.
The simple reason that we all denounced that—and it is still as true today—was that this was the only item of industrial capital goods, production equipment, subject to Purchase Tax. If one wants to tax a lorry, which is what it means, why not tax a railway engine, a Bristol freighter aircraft, a railway wagon—it would be equally silly.
When this tax was brought in, in 1950, it yielded in the first place £4·1 million. I commend to my right hon. Friend the growth of this yield. The following year it yielded £8·6 million, in 1952–53, £9·5 million, in 1953–54, £9·1 million—that was the year Purchase Tax came down to 25 per cent, from 33⅓ per cent.—in 1954–55, £12·8 million, 1955–56, £12·7 million, and in 1956–57 £12·3 million

My right hon. Friend condemned this tax in the roundest terms.
The present Economic Secretary, on that occasion—and he was as right then as he would be today because circumstances are exactly the same—said:
 We consider this proposal to be basically wrong.
In the peroration of my speech on that occasion I said:
 in principle this tax cannot do anything else but harm our industrial economy, and raise still further the increased costs we have been faced with in the last few years."—[OFFICIAL REPORT, 15th June, 1950; Vol. 476. c. 587 and 607.]
It has damaged the economy in more ways than one, and I entreat my right hon. Friend to examine this matter.
Finally, under the Purchase Tax heading, the effect of cutting in half the Purchase Tax on many of the pots and pans and other domestic goods, as they are generally called, has been to put a premium on mechanical contrivances and modern equipment in the home. For example, Clause 6 (1, a) states:
paragraph (a) of Group 12 (which comprises appliances and apparatus of kinds used for domestic purposes, and not designed for operation by electricity or gas).
In other words, every appliance in the various groups concerned will now have a very low rate of Purchase Tax compared with the equivalent gas or electrically-driven article.
For example, it creates a state of affairs in which an electric vacuum cleaner, normally known as a "Hoover" —I usually refrain from using a proprietary name—is carrying Purchase Tax of 60 per cent, whereas a dustpan and the little brush used with it, and what we used to call in my boyhood days a "Bissell", which is a hand carpet-sweeper, carry Purchase Tax of only 15 per cent. The electrically-operated washing machine has a Purchase Tax of 60 per cent, while the old-fashioned equivalent, a hand-operated machine or mangle, carries Purchase Tax of only 15 per cent. I could, though it would weary the House, go through the whole range of household appliances to demonstrate that the effect of the Clause is that modern electrical appliances, which we all want housewives to have in their homes, often carry four times the rate of Purchase Tax carried by the old-fashioned equivalent appliances.

Mr. Bence: We want to export them.

Mr. Nabarro: No. That is not the answer. The leading electrical manufacturing companies can furnish, without undue strain on the metal-supplying industries, greatly increased quantities both for export and for the home market, and they are anxious to do so. Their export prices are being affected today very largely by this artificial drag upon sales on the home market, created by an inordinately high rate—a premium rate—of Purchase Tax upon the development of mechanical contrivances for domestic purposes. I tell my right hon. Friend that this penal taxation on gas and electrical domestic appliances is merely putting a premium upon drudgery in the home.
That leads me to the general point that I want to make about Purchase Tax. One can go on talking about anomalies and incongruities indefinitely; in my view the time has come to scrap the Purchase Tax in its entirety. When a Conservative hon. Member said that to Sir Stafford Cripps in 1950, the right hon. Gentleman answered, "Yes, but it is only a valid argument if the hon. Gentleman will tell me how I can replace £300 million of revenue." Today, it is a question of replacing £500 million of revenue. My hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) said this afternoon that he would replace the Purchase Tax by what he called a "sales" tax, and lots of hon. Members loosely talk about a "retail sales" tax.
However they endeavour to express their intention, they want a qualitative and selective tax applied to sales on the home market. I do not want that at all. If I were Chancellor of the Exchequer I would replace that £500 million by legislating for a turnover tax at a very modest rate on the total consumption of the nation. It would include all selling transactions whether by manufacture, wholesale or retail, and it would be based on the universality of the auditors' certificate when the accounts of every enterprise in the country were assessed to Income Tax, as 99 per cent, of them are assessed today. It would really involve taking the invoiced sales of the companies for the year, on the manufacturing account, and applying a percentage rate to it.
My hon. Friend the Member for Scarborough and Whitby stated that the total consumption of the nation, leaving out services, was of the order of £14,000 million. To raise £500 million, the equivalent yield of the Purchase Tax, would mean a turnover tax of approximately 3½ per cent.
I want to know from the Chancellor— not this evening—why we cannot end this Purchase Tax, which is condemned in every quarter of the House, which is injurious to our export trade, which is harmful to home production, which is artificially holding down what otherwise would be rising living standards in this country? My final appeal to him is that before his next Budget he should establish, either a Departmental or an alternative form of inquiry into all the iniquities of the Purchase Tax with a view to scrapping it in its entirety in 1958 and replacing it by a simply-operated turnover tax of the kind that I advocate, which would be more fruitful in terms of revenue, easier to collect, much more difficult to evade, and generally in the interests of the productivity of the nation and our export trade.
I congratulate my right hon. Friend on his Finance Bill. I am sure he would have expected me not only to thank him for reduction of Purchase Tax on carpets, but also to criticise the general tenor of Clause 6. Other than that single Clause, I think that this Finance Bill is an important advance in fiscal and economic policy, and I wish my right hon. Friend good fortune in a speedy passage for it through all stages in the House of Commons.

9.12 p.m.

Mr. Douglas Houghton: I have sat through the Second Reading debate on every Finance Bill since I came into the House in the spring of 1949. I have spoken in most, if not all, of them, but never before have I had to endure the nervous anxiety of making my speech so late in the day.
I envy all right hon. and hon. Members who have already made their speeches, including the hon. Member for Kidderminster (Mr. Nabarro). I think I had better warm myself up by addressing a few remarks to him. His exuberance and self-confidence—I hope he will not take this as personally offensive—always


remind me of the inscription over the headquarters of a gymnasium at Alder-shot, where I once took a course:
 Be not wise in your own conceit; there is more hope of a fool.
The hon. Member was surely trying to mislead the House when he took the literal comparison between the level of tax in different countries and the net income after tax at different levels of income. It is the most facile observation that can be made that we are the most heavily taxed country in the world, yet so much depends on what we get for our money. There are many social services in this country which come out of taxation and which are not enjoyed by those in other countries.
One example, in making comparisons between the United States and Canada with this country, is the cost of medical attention for workers and their families and the cost of education—two very heavy items in domestic expenditure there. In fact, the cost of illness is one of the domestic fears overhanging the lives of all people there so much that millions are joining voluntary schemes and paying considerable sums of money towards them to offset the heavy cost of medical attention and hospital treatment if they have the misfortune to need it.
This is the Bill of the Budget, but before dealing with some parts of it and comments which have been made in the debate I should like to refer to the new committee which is to consider the working of the monetary and credit system. I confess that I was somewhat dismayed at the unfavourable comment made on the composition of the Committee by my hon. Friend the Member for Stechford (Mr. Roy Jenkins). I always respect his judgment and his knowledge of many people in the economic world which is closer than mine.
I will not say whether there is a Bevin on the committee, but I will say that the two trade unionists on it are both wise and courageous men. In Mr. Ernest Jones, the President of the National Union of Mineworkers, we have one of the wisest and the most sagacious trade union leaders in the country today. Mr. Woodcock was a member of the Royal Commission on the Taxation of Profits and Income and he has served on many committees of inquiry. I feel sure that

both these members of the committee will give a very good account of themselves, and I only hope that my hon. Friend's fears about the outcome of this committee's work will not be realised.
I joined with a small all-party committee in meeting the right hon. Gentleman's predecessor. The hon. Member for Aberdeenshire, East (Sir R. Boothby), the hon. Member for Orkney and Shetland (Mr. Grimond) and some hon. Friends and myself went to see the present Prime Minister to say that in our opinion Macmillan was now out of date and that we badly needed a fresh stocktaking of our monetary and credit system.
I am sure that many of us miss the annual exposure of the machinations of the financial underworld to which we listened from Mr. Norman Smith, formerly the hon. Member for Nottingham, South. He gave a most plausible explanation of the biggest racket that the world had ever known. It was so convincing that one wondered whether there was not a catch in the argument somewhere, for surely things could never have gone on so badly for so long.
I hope that we shall have a speedy, useful and courageous report from the committee, that there will be no submissions to orthodoxy or to common practice and that there will be a searching inquiry into how the whole thing works, because many people outside the House are always asking the questions which nobody can answer: if too much money is chasing too few goods where does the money come from? Who makes it? Is it printed? Is it created out of the air, as Mr. Norman Smith used to say? How does this curious phenomenon come about? We wish the committee speed and success in its work.
Turning to the Bill, the purpose of the Finance Bill is, I suppose, first, to make the revenue secure; and the Chancellor has certainly balanced the Budget and to spare. He has also taken the opportunity in the Finance Bill of closing some loopholes and of strengthening the collection of the revenue. We were pleased to see that the right hon. Gentleman is to end the disappearing trick. The racehorse which died started something.
When I heard the Financial Secretary explaining this afternoon that if a gift is made with the expectation that


there may be a capital accretion then the value of the capital accretion will be reckoned as part of the value of the gift, it occurred to some of us on these benches, what would have happened if the racehorse, instead of dying had had a foal? Would that be a capital accretion? If the next time a racehorse is given away it is given away in foal, will that be a capital accretion? That will certainly be a point to consider when we deal with the Clause in detail.
May I ask the right hon. Gentleman how and when he proposes to tackle the backlog of administrative reform which is left over from the Report of the Royal Commission on the Taxation of Profits and Income? If he will occasionally look at the summary of the Report he will see how much remains to be done. Could he not, with advantage, consider introducing a "Tax Management Bill" to contain many of these administrative changes, not involving the level of taxation or the Revenue? It is something which could conveniently be done at another parliamentary season of the year, and might bring about more speedy implementation of these reforms.
I urge the Chancellor to consider the recommendation that small traders should be asked to keep accounts in a simple and specified form. I am sure that if the right hon. Gentleman consults his advisers from the Inland Revenue, they will tell him that there is more trouble than enough among the growing number of small traders who cannot, or do not, keep proper books; who cannot, or do not, render proper accounts—where there are many opportunities for lack of zeal in making records for taxation purposes. That is, in fact, where most of the back-duty cases are now coming from, and the provision should, I think, be strengthened without undue delay in the interests both of the taxpayer and of the Revenue.
Is it not a reflection upon this House that, in 1957, there is still a substantial property qualification to be a Commissioner of Income Tax? There are class distinctions which go back in fiscal history, and which should be swept away. Why cannot the ordinary taxpayer, without property qualification, sit in judgment on some of the claims being made by some of his more propertied contemporaries in the community? His sense of justice, I am sure, is just as strong as, if

not stronger than, that of many local Income Tax commissioners today. I plead with him to do something to overtake this backlog of administrative reform.
The next thing which the Bill will aim at doing is to ease the burden of taxation where it bears harshly or unfairly, or is damaging to particular activities or industries. The right hon. Gentleman's Budget certainly contains some of those easements, which are welcomed on both sides of the House. For example, we welcome the Purchase Tax reliefs which are in the Bill. The House will remember that one of the right hon. Gentleman's predecessors came to this House sounding a warning on a frying-pan, and then levied additional Purchase Tax on household goods and equipment, an imposition which I myself believe he must have regretted ever since. He never had a more unwilling band of followers than on that occasion. We are glad to see that that unnecessary imposition on domestic utensils is at least partially relieved in this Bill.
Such things as the relief of Entertainments Duty on the live theatre and on cinema admission prices are welcome on both sides of the House. We will not give the right hon. Gentleman any particular credit for taking off the "Suez shilling," but we will not dissent from the compensating duty which the right hon. Gentleman is levying on the television licence. One quarter of the right hon. Gentleman's Budget reliefs go to indirect taxation. Another quarter, also in pursuance of the aim of easing the burden of taxation, goes to the relief of Income Tax on the elderly and those with older children at school.
I am glad that the right hon. Gentleman has not accepted the recommendations of the Royal Commission to base the amount of child relief on total income. That would have been most inconvenient, from an administration point of view, and would have been equally inconvenient to the taxpayer, because in so many cases the amount of the child allowance would have remained undetermined until the end of the Income Tax year, when the total income was known. Perhaps this new idea of basing the child relief on age is as suitable as the one proposed by the Royal Commission.
It seems to me now that the right hon. Gentleman really ought to give renewed


attention to the problem of the absence of a tapering provision of the income of a child. I am not thinking so much of children with unearned income, because in many cases they receive this income from grandmothers or other generous relatives. Sometimes, I feel sure, this income derives from a compact between uncle and father, and mutual arrangements of that kind are possible. I am not really concerned about the unearned income of children, which I am sure will, in many cases, be found to be just about the right amount, which is £84 a year.
The hon. Member for Huddersfield, West (Mr. Wade) referred to the problem of the payment of apprentices, which I think is a real one in this connection, and also of juvenile's earnings in the year in which they leave school and start work. It really is very hard on parents when young persons start work, probably towards the end of the Income Tax year, and, if they earn over £85 before the end of the Income Tax year, the parents are then completely disqualified from the child allowance for the whole of the year.
I am sure that there is a substantial anomaly between educational grants, which are not reckoned for this purpose, and the modest payments given to apprentices, where, I think, equal consideration should be given. We do not want to drive young people away from apprenticeships for skill and craft into unskilled jobs, which may be better paid, but which will not add so greatly to the development of our skills and our work.
Should the Chancellor have done any more? Could he not have looked at the Royal Commission's recommendations about the incapacitated child? Surely that could have been done. Could he not also have looked at the dependent relative allowance, on which the Royal Commission recommended that the deserted mother should qualify on the same basis as the widowed mother? Then, the Royal Commission made a proposal about total incapacity relief to 100 per cent, disabled persons. This would have cost little additional money, and would have relieved individual hardship of quite a distressing character.
The age exemption which the Chancellor has given is, I think, welcome. The amount of relief in the case of a single person is not very large. It is more sub-

stantial in the case of a married couple. I am glad that the Financial Secretary made clear the position, because I have had a lot of correspondence expressing doubt about the restriction of the exemption to total incomes—entire incomes—of not more than £250 in the case of the single person and £400 in the case of the married couple when one of them is over 65 years of age.
The extension of the age relief from £600 to £700 is carrying that relief, perhaps, into the sphere of fiscal generosity. I do not want to exaggerate, but it is possible now for a person with from £15,000 to £20,000 in capital to get the two-ninths earned income relief on the investment income. That is carrying this concession, which was intended to be an alternative to the earned income relief granted to those who receive pensions, perhaps a little high, although I am quite sure that this additional relief will be very welcome to those concerned.
My hon. Friend the Member for Coatbridge and Airdrie (Mrs. Mann) criticised the taxation arrangements of married women. I was going to suggest to the Chancellor that we ought to consider whether anything can be done to stem the unseemly queue of people to get married at just about the end of the financial year. That is not the most profitable time of year to get married. Half-way through the financial year— about October—is the best time to get married.
If the wife is working, she will get the single person's allowance on earnings up to the date of marriage and the special earned income relief for married women on earnings after marriage, and the husband will get the married man's allowance for the whole of the financial year. That is a fairly good start for the married couple. I leave it at this by appealing to the Chancellor to consider whether he can do something to encourage couples to marry for love instead of Income Tax money.
I come now to part of the right hon. Gentleman's proposals which may be regarded as an essential part of the Government's general economic strategy. This is the part of the Bill that is to help us on our way fighting all the time for our security and standard of life with a very finely-balanced economy. I share the anxieties of my hon. Friend


the Member for Northfield (Mr. Chapman), who did well to remind the House once again that we have, perhaps, the most precarious economy of any industrialised country in the world. We have to remember that in everything we do.
We have suffered disappointments in the past. We have had government by fits and starts. We have moved forward, we have been jerked back. We have overstrained ourselves and then we have had to tighten our belts and face all the other curious physical contortions and difficulties that we have had to endure.
What does this amount to? First, one-quarter of the total reliefs is given to trading operations overseas. All I shall say about that is this. In Committee, there will be many close examinations of the safeguards and the checks that will be necessary to make these complicated Clauses watertight from a revenue point of view. When special and substantial tax concessions such as these are given to help particular interests, industries or forms of enterprise, I wonder whether those concerned should not accept an over-riding code of fiscal morality and be willing to accept a general prohibition against abuse.
I know how reluctant the Chancellor and the House is to write into legislation omnibus provisions against malpractices and evasions against the intention of the Bill. It has been done in the past in connection with the Excess Profits Tax and the Excess Profits Levy. I believe it is the only way in which these concessions can be fully safeguarded against abuse. It is surely a reflection upon men of great power and responsibility if they are to take mean advantage of concessions which the country has freely given out of total revenue in order to further their pioneering endeavours and enterprises overseas. I hope that they will bear that in mind, even if the Chancellor does not feel able to write into the Bill some over-riding safeguards against abuse.
I now come to the earned income relief. I can only assume that this must take its place also among those purposes of the Bill which seek to expand our economy and increase our wealth. These are reliefs to people whose efforts are judged to be of particular importance to the expansion of our economy. Let us

bear in mind, also, that the Surtax payers will have a share in the concessions given by way of higher reliefs for children, so that they have a hidden advantage in those concessions, too. Very substantial sums are apportioned to them in the reliefs in the Bill.
I think that for the record I should mention that earned income relief is older than Surtax and that the coincidence of earned income relief and Surtax, the one finishing about where the other begins, was regarded as singularly unfortunate by the Royal Commission on the Taxation of Profits and Income which considered this matter. It said:
 The coincidence of these two limits creates a big jump in liability and in consequence a marked ' kink' in what should be a smooth curve of progression.
Therefore, we do not dissent from the right hon. Gentleman's proposal to carry earned income relief higher up, nor are we dissenting from his proposal to allow, within limits, personal reliefs to be set against Surtax liability. But we think that he has gone too far. The Royal Commission thought that the two-ninths should go up to £2,500 and the one-ninth should go from £2,500 to £3,000. The Chancellor has gone to £4,000 with the two-ninths and to £10,000 a year with the one-ninth relief, which is far beyond anything that the Royal Commission recommended at that time.
It really is hard to justify granting one-quarter of the total tax reliefs to one group of taxpayers of approximately 250,000. It is too much at once. Such lavish tax concessions at that level were singularly ill-timed when the Chancellor announced them. They have given far too many people a natural but quite unprofitable argument that if the Chancellor can afford to give away £24 million to the Surtax payer he can afford to do this, that and the other. We know that that is an unprofitable argument, but many people are hanging their demands upon that peg. I can only conclude that the Chancellor had become resigned to the current round of wage increases and that he abandoned tax relief restraint at the time that he made his Budget speech.
An article in The Banker said:
 The deterioration in the prospect after the Transport Commission's unconditional award of 5 per cent, late in March undoubtedly stiffened the Chancellor's resolve to add only a modest stimulus of his own.


I do not share the implied criticism of the British Transport Commission. If the nationalised industries cannot give their workers wages which are fair comparisons with the general level of wages outside, then those working for the nationalised industries will have as big a grievance as those in the public service in the past.
The suggestion appears to be that the Chancellor realised that his prospective surplus was too big to make it politically possible to give no tax reliefs at all, or very few, so he decided on a curious form of tax relief to the well-to-do, which he assumed would not increase consumption very much. Surtax payers, being both prudent and abstemious, will, the Chancellor believes, save the money which he is granting to them in tax relief. It may well be so, because so many of their extravagances are paid for by commerce and industry and do not come out of personal incomes at all.
All the time, however, the right hon. Gentleman has to reckon with the workers and their trade unions. Here we come to the crux of our economy and the real danger point in Britain's future. In the same article in The Banker it is stated that
 Once the primary task of restoring a sound foundation for sterling has been achieved, part of the increment in production can again safely be made available for increased consumption. But even then it will be possible to distribute a significant part of this by lightening the load on the taxpayer only if an undue share is not pre-empted by wage demands.
We note the words—
… if an undue share is not pre-empted by wage demands.
What is an undue share for the worker today? What is an undue share when speaking of an increment in production being available for consumption? The worker knows from his past experience that forces combine nearly always to prevent him from getting an undue share. He feels, therefore, that he is entitled to claim what a situation is likely to yield, because he knows from past experience that his sufferings then were in inverse ratio to his opportunities today.
One of the difficulties which the Chancellor is bound to have is that he has already taken a hand in fixing shares. The moment he gives tax reliefs as incentives,

he becomes party to fixing rewards, and what he does for some is of close interest to others. I assume that the Conservative aim is to contain the stresses and strains of a changing society within its traditional framework. How, then, do the Government propose to harmonise the natural and persistent claims of organised labour upon the national product with the requirements of economic policy?
I do not think that there is a Conservative answer to that, and recent attempts to do this have revealed some dangers. Just as the Chancellor delegated some of the more unpleasant parts of his monetary policy to the bank managers, so he delegated some of the tougher parts of his economic policy to the shipbuilding and engineering employers, and he has let them down. They stood firm. There was a strike. A court of inquiry was set up and the strike was called off provisionally. A few days afterwards the Chancellor rose in his place and calmly gave 250,000 Surtax payers a rise of £20 million, tax free.
The right hon. Gentleman cannot escape the psychological reactions of that step upon the mentality of the great mass of the workers, and now apparently the Chancellor has been speaking to a meeting wherein he is offering fresh hope on the one hand but uttering stern warning on the other. He says:
 The nation must not have another year in which people would be paid more for doing the same amount of work.
which, of course, is just where the shipbuilding and engineering employers came in. This is what the Government have been saying all along. But it makes no difference. It happens just the same. The Chancellor must now acknowledge that there is a new general wage increase in process of going through our economy.
A writer in a very wise Socialist periodical called Socialist Commentary says:
The competitive struggle of today is not one of individualism, but of organised and powerful bargaining units. The gatuitously handsome Income Tax and Surtax reliefs may prove yet another obstacle in the way of the wages policy which we so badly need.
The fundamental dilemma of the Conservative Administration is how to get organised labour to accept the consequences of their economic and social policies without protest.
My hon. Friend the Member for Leeds, West (Mr. C. Pannell) was certainly right in saying that the Government have to contend with the traditional and historical attitude of suspicion and lack of confidence of workers in a Conservative Government. That is a supreme challenge that the right hon. Gentleman has to meet. Workers can no longer improve their standard of life through industrial action alone. They know that. Yet they feel that it is the only course open to them in a democratic society. Industrial action for political objects is rightly denounced and rejected in the trade union movement but, as has already been said, a Government may continue in office long after they have surrendered any moral claim to continue to govern. That is the position of Her Majesty's Government today.
I ask the right hon. Gentleman: how can a Conservative Government follow their political principles and satisfy many who support them without creating tensions which may prove a dangerous threat to our very survival? This Bill leaves that fundamental question unanswered.

9.48 p.m.

The Chancellor of the Exchequer (Mr. Peter Thorneycroft): I rise to make a few remarks in reply to the debate on the Second Reading of the Finance Bill. I always feel that the debate on the Second Reading of the Finance Bill is rather a half-way house between the broad issues which are discussed on the Budget and the details which are dealt with when we reach the Committee stage. One has some difficulty in answering both the economic arguments and the many detailed points, but I will do the best I can within the short compass that is open to one.
The hon. Member for Sowerby (Mr. Houghton) speaks with very great experience on this subject. I think that there are few Members in the House who have had as much experience as he has, particularly on the administrative side of this matter. He made also a very notable speech in the Budget debate on wider matters.
I thank the hon. Member very much for what he said about the monetary Committee. I am very glad to have his support on that, because I think that both sides of the House can claim some part of the parenthood of that Committee.

The hon. Member joined with my hon. Friend the Member for Aberdeenshire, East (Sir R. Boothby) and others in pressing the necessity for it upon my predecessor. I think that when the report of that Committee comes out it may well set the pattern of thinking on monetary policy for perhaps some time ahead. Therefore, it is important that it should be supported on both sides of the House.
The hon. Gentleman also referred to —and I must say that I agree with him— how much remains to be done in taxation policy. I think that any Chancellor, on any Finance Bill, would always feel that. Inevitably, there must be a very wide range of administrative reforms which one does not include in the Finance Bill, if only because one has an instinct to keep it not too long and not too complex. I realise that there are many other administrative reforms—I am not now speaking about tax matters—which remain to be dealt with, and I will certainly ponder the hon. Member's suggestions as to how we might pursue that matter.
The same, of course, applies in taxation. Try how he would, no Chancellor could hope to produce a Finance Bill which did not leave far more taxes unrelieved than the tax reliefs which he in fact granted. I appreciate that. I rather parted company with the hon. Gentleman when he spoke about Surtax. I cannot admit that tax relief in anything, whether above £2,000 or below £2,000 a year, is somehow giving something away. I cannot accept that approach to taxation. I recognise, as we all do, that the State has got to tax; but when we do tax, let us be honest with ourselves at the Treasury, whatever party we may belong to, and remember that we are taking money which belongs to other people and using it for purposes which Parliament approves. When we find that we are able—we must all make our best endeavours in this respect—to do with rather less money., let us not think that we are giving something away.
Incidentally, the principal matter to which the hon. Gentleman referred was not even, in the main, Surtax relief, but earned income relief, and earned income relief is something which has been going on for a very long time. There is no particular inherent, moral reason why earned income relief should stop at £2,000 a year, and I believe that the hon. Member himself really recognises that.
As regards the Finance Bill generally, I will deal with one or two of the details in a moment. The hon. Member for Northfield (Mr. Chapman), together with a number of other hon. Members, referred to the economic climate in which these proposals are put forward. The hon. Member for Northfield, indeed, suggested that it would be a good thing if the Treasury had more economic advice, and he referred to a suggestion made the other day that if only we had more economists, matters would be all right. I wish that our affairs were capable of so easy a solution. I found myself very well served, as all Chancellors are, by the economic staff at the Treasury.

Mr. John Cronin: Does the right hon. Gentleman recollect that his predecessor, the present Prime Minister, said in his Budget speech that there was a real defect in the Treasury armoury so far as economic advice was concerned?

Mr. Thorneycroft: Not wishing to be at all controversial or impolite to the economists, I would merely observe that the more economic advice one has the more conflicting does it become. I can but speak from such experience as I have. I believe that when he has listened to all the advice and studied all the figures put before him, any Chancellor of any party, in the last resort, acts upon what his own hunch about these matters is. He tries to judge the economic climate as best he can. He tries to judge whether the wind is blowing broadly in the direction of greater activity, or whether there is a danger of stagnation. Those are the judgments which he has to make, and he will get no unanimity of advice to guide him upon matters of that kind.
The broad judgment which I made, rightly or wrongly, was that if one looked at the demand for capital, at the plans for investment, and at the trends of consumption, the indications were not that we were doing too little but the wonder was how on earth we could manage to do so much. That was the indication that came to my mind, and I rather think that the hon. Member for Northfield was speaking in a similar sense when he pointed to the dangers of going into further inflation.
In the circumstances, I am confident that the broad judgment which we made

was the right one, namely, that we should not introduce too many tax reliefs, and that we should keep ourselves within the compass of about £100 million of tax reliefs. It is tempting to go further. It may be popular to go further, but it would be dangerous to buy an easy popularity at the expense of the balance of payments and at the expense of the strength of sterling. In any event, that is the judgment that we have formed, and
I must tell hon. Members that both now and on the Committee stage I feel myself committed to stay within that general pattern.
While the Financial Secretary was speaking, I heard a certain murmur round about me when he was dealing with the question of the gifts inter vivos and the "dead horse" scheme. The question appeared to be raised whether there was not some element of retrospection in this matter. These questions of retrospection deserve very careful consideration, because no one wants to do something which would break with the general traditions of the House in these matters, and I will certainly examine any point of that kind. But I have at least one rather respectable precedent. Section 11 of the Finance Act, 1900, was designed to stop avoidance of Estate Duty. The Section opened with the words:
 In the case of every person dying after the thirty-first day of March, nineteen hundred …
the end of the financial year. The Act received the Royal Assent on 9th April. Lord Salisbury was Prime Minister and Sir Michael Hicks-Beach was Chancellor of the Exchequer. I do not wish to prejudge the position, and I may be wrong, but I cannot be said to be not respectable in the matter of this kind.
The right hon. Member for Smethwick (Mr. Gordon Walker) welcomed the entertainment tax relief on sport and the living theatre. Indeed, I think that that has been generally welcomed on both sides of the House. He said that it was in his Election programme. He will not mind if I say that it could have been in any of the Budgets which his right hon. Friends introduced. Nevertheless, we have now done it, and it is nice to have unanimity.
The right hon. Gentleman referred to the question of the television duty. I am glad to feel that the principle that


there should be a duty on television has been accepted on both sides of the House. He pressed the point about whether we should not make some exception in the case of old-age pensioners. We can discuss that in Committee, but there are real difficulties about saying that anybody over the age of 65 shall not have to pay the television duty, and I think that the right hon. Gentleman will find great difficulty in framing anything which can be sustained.
He said that he was not against going beyond the £2,000 limit in regard to earned income relief, and that it would have been all right if there had been a capital gains tax. When he was pressed about what he meant by a capital gains tax, he found himself in some difficulty and quoted various parts of the Royal Commission's Report on this matter. The majority came down solidly against it. Sometimes he quoted the minority Report and sometimes that of the majority, but in that he may not be so very different from other hon. Members. I believe it to be right to carry earned income relief, as the right hon. Gentleman agrees, beyond the £2,000 limit and I believe that the general sense of the country is that we were right to do so.
The right hon. Gentleman then turned to the subject of monetary policy, and he said that I had been critical of monetary policy. I am not sure what that meant, whether it meant that I thought that there should not be a monetary policy or that we had been pursuing the wrong sort of monetary policy. As I understood him, his idea was that we should return to the cheap money policy advocated by the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton). If I did that, there might be some justice in the taunt that I had an assignment with inflation, and I hope that the right hon. Gentleman will consider a little carefully before advocating cheap money at a moment—[Interruption.] If the right hon. Member for Huyton (Mr. H. Wilson) has a different monetary policy, I hope that it will be explained to the House at some stage, because none of us is clear about the Opposition's view of this, but if that were the policy at the moment, with considerable pressure from investment, it would be unwise.
I believe that in principle the right hon. Gentleman approved the idea that we should help the pioneering companies

—as I think the House in general approves it. The pioneer companies are really designed to help in the overseas territories. The reason why we are going further is in order to help this country. It is the need for the development of some of our great industries and the advantage that they can bring to us which has impelled me to go rather further than some of the suggestions made in last year's Finance Bill debate. The right hon. Gentleman agreed that there was a case for helping our companies overseas, and he also agreed that the relief should go to trading income and not investment income.
He then made a number of criticisms which I will not deal with in great detail because we shall have many discussions upon them in Committee. He did not think that this relief should apply to Profits Tax. Profits Tax falls upon the reserves of a company, and it does not seem to me to be logical to tax the reserves of a company if one wants it to invest its profits in an overseas organisation. He suggested that difficulties might arise in the case of winding up or liquidation, and I agree. I believe it was one of my hon. Friends who said that one does not normally form a company—especially a trading company—in order to wind it up, although other kinds of companies have been formed for that purpose. We realise that the problem exists and, as the right hon. Gentleman knows, we have drafted provisions which are designed to deal with it.
That is also the case with goods placed upon a ship in a British port, which have to be placed at the ordinary current price, f.o.b. The right hon. Gentleman said that there would be difficulties in policing that provision. We are satisfied that we can do it. Indeed, it is important that we should, because if we fail we may lay ourselves open to the criticism of putting over some form of concealed export subsidy or the like. There is no real difference between us, in principle, upon these issues. We are all concerned to see that these tax reliefs are given in the proper place for the purposes which we have defined in these debates, and in Committee we should all concentrate in seeing that loopholes are stopped up and that abuses shall not occur.
The right hon. Gentleman also said that there must be some limit to overseas


investment, and in that I agree with him. It is important to realise that with the capital resources available to us there is some limit to the amount that we can plough into overseas countries, be they in the Commonwealth or elsewhere, much as we desire to do so. While the Bill gives some incentive to overseas investment it also ensures that when the investment has taken place the business concern is placed upon as sound a competitive basis as that of anyone else operating in its area. It is most important that if a person wants to make an investment in a certain overseas territory and finds that his resources are such that he can, no unnecessary tax discrimination is made against British people operating in that part of the world.
The right hon. Member said that it might be possible to limit the effect of the provision to cases where we were making or mining something which we imported. That is an important feature of these operations, but we must think of exports as well as imports, and one of the provisions allows an overseas selling company to be hived off as an overseas trading corporation, thus playing a useful part in helping our exports in various parts of the world.
My hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) said that a Budget must be judged by its effect on the economy, and I think that broadly he supported the general picture and background of the Finance Bill and the Budget which I have described earlier. My hon. Friend paid particular attention to the fact that no country had ever succeeded in achieving stable prices and full employment at the same time. The point which he emphasised was that whatever may be said about wages and profits—with which I do not propose to deal in detail in the compass of this debate—one thing was clear; that if we could produce more and increase our productivity, that was the most satisfactory contribution and the least painful contribution to stable prices that any of us could think of. I think that my hon. Friend carried the House with him in that conclusion.
The hon. Member for Ashton-under-Lyne (Mr. Rhodes) said that he thought that the Bill was an interesting one, and he said some pleasant things to me about,

at any rate, some features in it. The hon. Member spoke of the shipping industry and the discriminatory investment allowance of 40 per cent, allowed to it. He asked, what about wool. May I say this to some right hon. and hon. Gentlemen opposite: be under no illusions that if one carries discrimination in investment allowances very far, there will be many people who will say, "What about this?" and "What about that?".
I am perfectly prepared to defend the degree of discrimination which already exists. It may be that we shall debate and discuss whether there should not be more. But I warn the House that if we carry discrimination very far in matters of investment, particularly in this country where the tradition of non-discrimination in tax matters is deeply written into our practice in the fiscal field, we may run into some difficulties.
The hon. Gentleman quoted the problem of figures and the handicaps under which we, or some of us, work, and the cost of borrowing money. He asked how we shall measure up to the Free Trade Area. The answer is that if we are going to measure up to the Free Trade Area or any other trading areas, it must be on the basis of trying not to tax ourselves too much higher than everybody else. It must be on the basis of trying to invest money on the same scale as other people, on the basis of being prepared to work the machines we have with the same industry that other people do. He asked a question about a particular ship, to which he referred, which had been bought from the Germans and sold at a premium to the Americans. The answer to that is that if it had been under the general rule, if it had been sold on under three years, no investment allowance would be carried with it; that is under the general rule.
The hon. Member for Huddersfield, West (Mr. Wade) said we had given too much relief in the higher income brackets. I have dealt with that point, and at this moment I do not wish to add anything to what I have said. He wanted the Capital Issues Committee to be less strict. We are all agreed that high investment is a good thing. But surely it is clear that unless we are to run into a dangerously inflationary situation there must be very high saving. There is a limit to the number of things that we


can try to do at the same time. I agree that if we have our economy in perfect balance it may be possible to say either that the Capital Issues Committee should be wound up or at any rate should not play any large part. Indeed there was a time a year or two ago when it virtually played no part in events, and the situation was in balance. But in our complex society, particularly at a moment when no one is completely happy about the full working of the monetary system, I think we should be wise to retain that body and that for the time being it must place some limit on the amount of investment taking place.
The hon. Member for Ladywood (Mr. V. Yates) said that we must cut arms expenditure and put the money into the social services. We have cut arms expenditure and cut it very substantially this year, thanks to the work of my right hon. Friend the Minister of Defence. I agree that we should pursue that policy and scale down the amount of money that is spent in that direction within the limit of what is safe and proper. I agree that we have to sustain the spending on the social services, but we have to do more than that. We have to put some of this saving, quite a substantial part of it, to investment in productive industry, because it is on the foundation of an efficient productive industry that the social services must really rest.
The hon. Member for Stafford and Stone (Mr. H. Fraser) referred to the need for big tankers and the facilities for them. I quite agree with that. I would only say this: when one is talking about the tankers that we need and the amount of engineering exports that we require and the capital goods that have to be put in here, let us remember that there is a limit to the amount of steel plate, the amount of money, and the number of skilled men who really can be devoted to these tasks. I agree on the need for all of them. But one of the reasons that we have kept the tax relief in this Budget and in this Finance Bill within the compass that I have described is simply to leave room for certain essential developments of that character.
The hon. Member for Northfield said in his speech that our economy was balanced on a knife edge. It always will be. I think that it is an illusion to

imagine that we are suddenly going to find ourselves, in our sort of economy, in a moment when it will be quite easy without any danger of either stagnation or inflation. I think that that is quite inevitable in a small island trading overseas to the extent that we do.
The hon. Member referred to the difficulty of forecasts. I said earlier that I thought that largely what was involved was judgment on the best forecasts one can have. He said that I had been rather over-optimistic in some of my remarks I am an optimistic person and I think that a Chancellor of the Exchequer ought to be an optimistic person. When I was talking the other day about reaching a moment in our economy where we were going into a new phase, I meant that because I believe that production is going to take an upward turn. I went on to couple that with a warning that we could not really afford an upward turn unless we could match it with more exports to pay for the imports coming into this country and more productivity here. When we match it with more exports and more productivity, we can afford more goods produced for consumption at home and for investment in the other things that we want. The hon. Member said that if we left out the Purchase Tax and Entertainments Duty changes, the old-age relief and allowances for children, quite a lot went to the Surtax payers. I agree with that, but I do not think that we can leave them all out.
My hon. Friend the Member for Somerset, North (Mr. Leather) welcomed the overseas trade corporation arrangements. He asked a question about the companies which are resident overseas. It has been argued by him and some other hon. Members that because a United Kingdom holding company with subsidiaries which are O.T.C.s can receive dividends and channel them off to another O.T.C. in some other country if necessary, this particular arrangement could be applied to a company which was not an O.T.C, which was not a British company, but which was really in effect in our tax law a foreign company registered overseas. That does not apply at the present time in the terms of the Bill, which is designed, rightly or wrongly, for the benefit of British companies, and not for foreign companies, resident overseas. We are prepared to


examine in detail any proposals which my hon. Friend has, but we can imagine fairly substantial difficulties in extending the Bill to the foreign countries to which my hon. Friend referred.

Mr. Leather: The Clause refers to companies "resident in the United Kingdom". It is possible for a company to be resident in Jamaica, Australia and elsewhere, and still be a completely British-owned company which pays its return on investment to British investors?

Mr. Thorneycroft: I am talking about a company which is resident overseas and which is not paying United Kingdom Income Tax. Such companies are outside the scope of the Bill. I am only seeking to make clear the position. I am prepared to look into the arguments for an alternative, but it would alter in quite a substantial manner the present conception of the Bill.
I have tried to answer many of the points which have been put forward. We can be satisfied with the reception which the Finance Bill has had. [HON. MEMBERS: "Hear, hear."]. I do not detect that firm determination to throw it out which appeared in some Opposition speeches.

Mr. Nabarro: Has my right hon. Friend observed, in reference to his phrase about the firm determination of the Opposition, that the Opposition Benches are at this moment populated by 23 Socialists and three Liberals?

Mrs. Mann: After such a remark I must point out that during much of the debate today there were fewer than ten Members on the Government Benches and that I twice challenged a count.

Mr. Speaker: There is no point of order in either of those remarks.

Mr. Thorneycroft: We should pay attention to the quality and not to the quantity of hon. Members who are present on all sides of the House. Whatever their number, I am grateful for the constructive speeches that we have had from all sides on this Second Reading.
Naturally I have not been able to reply to all the points raised, but with other Members of the Government I will study

the various points that have been made. I thank the House for its help. We look forward to a constructive Committee stage, in which we can still further improve the Measure.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House.

Committee Tomorrow.

Orders of the Day — SHAWS WILL TRUST

Motion made, and Question proposed, That this House do now adjourn.— [Mr. R. Thompson]

10.18 p.m.

Mr. I. J. Pitman: In July, 1944, the late Mr. Bernard Shaw wrote to me to report how he had been getting on with, and what he was doing in respect of, his will, particularly in the matter of the design of a new English alphabet. This matter was very dear to his heart.
It was a very modest proposition, which consisted of a statistical inquiry and the publication of a book of one of his plays, with one page printed in the new alphabet and a comparable page in the old alphabet. In that letter, having explained it all, he asked me to do everything I could to see that his wishes were carried out. That put me in a moral position of obligation—in fact, I would say a sacred duty—to do all I can to help Bernard Shaw in that respect.
As the House will know, the Court of Chancery found against those sections of the will for which he asked my support. Judgment was given on 20th February and I immediately consulted a solicitor to find out what action I might take to carry out this sacred obligation which I had. Our conclusion was that I ought to try to make an appointment with Mr. Milner Holland, who had been conducting on behalf of the Attorney-General and the Public Trustee the arguments in support of Shaw's will.
As I had been working in both close and friendly association with him during the five days of the case, I thought that that was excellent. He reported to me that he had made an appointment for 5th March and that appointment had


been made subject to a reservation, made by Mr. Milner Holland, of the Attorney-General giving his consent. That was very proper indeed, and I should say that throughout Mr. Milner Holland has conducted himself with a very proper regard for his duties to the instructing authority, which was the Attorney-General.
From 25th February, when the appointment was made, to 5th March, the date appointed, no reply was obtainable as to whether the Attorney-General would consent to Mr. Milner Holland seeing me. The application was made quite properly by my solicitor through the Treasury Solicitor, which is the only appropriate channel. We did not get any answer. I wish to ask why we got no answer, and I hope the Attorney-General will say tonight why it was so long before we got, not indeed, an answer, but the absence of an answer, and why, having regard to the fact that a Queen's Counsel is a busy man and there are courtesies to Members of Parliament, no answer was, in fact, given.
Thus, on 4th March this year, my solicitor was forced to report that no consent had been obtained. He also reported that there was a rather "sticky" atmosphere at the Treasury Solicitor's office and he doubted the possibility of receiving any answer in time for the meeting, which was due the following day. After discussing it with him we— I think very properly—agreed that I ought to see the Attorney-General that day to ask him to give an immediate reply so that the appointment could be carried out. There was a three-line Whip for that night and there was an opportunity, therefore, to ask him. I had no cause to expect a refusal. In fact, I was expecting an answer, and a favourable answer. I made a very serious approach to him on what I regarded as a serious matter.
Here followed a mistake. It not having been an official approach, I had no right to publish anything. But I did. I have apologised to my right hon. and learned Friend personally and in writing. I have apologised thus privately to the Attorney-General and I want to do so now in front of the whole House and to apologise also to the House. The trouble which has since happened from my action emphasises only too well how wise is our

rule in this House. Urgent and apparently simply as it was, I ought to have written my question, or clearly indicated that the approach in person was, indeed, as official as a letter. These considerations are in no sense a reservation. My apology to him and to the House is unqualified.
However, the question remains, why did he wish me not to see counsel? I would add a second question. Why, a year ago, did he similarly refuse to allow me to see counsel when I then asked to see counsel? He might say that he did not refuse. He will be wrong. I never met counsel until the eve of the case and then it was at his counsel's request, not mine.
All my requests to the Treasury Solicitor that I should be allowed to see counsel were clearly ruled out because of the Attorney-General's letter to me. In his letter to me of 19th April, 1956, he wrote:
 I think it is desirable that there should be no departure from the ordinary rules in this case. It would be unusual for someone who is not a party to the action to have direct access to counsel.
He may think and he may say tonight that he gave me permission to see counsel, but only in the presence of the Treasury Solicitor. That is not so, and I would have welcomed the condition. I repeat, I saw counsel only after the court case was begun and I saw him then not at my request, but only at his.
I would advance seven reasons why his view that to be agreeable would be "unusual" will not hold water, and I should like to ask him seven questions which I hope he will answer tonight corresponding with them.
First, he is the only party putting the case for Shaw's side. No one else in the whole world except he can be a party to the case on the issue of educational charity and that of benefit to the public. Is not his refusal, then, tantamount to denying to anyone, however potentially well informed and however potentially helpful to the courts, access to the counsel, who alone can help the courts?
Secondly, his view contrasts oddly with that of his predecessor, my right hon. and learned Friend the Member for Chertsey (Sir L. Heald). When I asked him he readily gave his consent. I want to ask


the Attorney-General, was his predecessor wrong? Ought it not rather to be taken for granted that counsel would welcome any competent help offered? Ought not counsel to be trusted to exercise his own judgment to continue discussions and to seek co-operation whenever to do so would be helpful to him and the case
Thirdly, when the case was launched Treasury counsel certainly appeared to have thought that it was not only usual, but most helpful. First, he ultimately, though through the fault of the Attorney-General over-late, asked me to help, and, secondly, he appears to have valued that help and my potential helpfulness. At any rate, he advised me that it would help him and the court were I to return especially from Switzerland to be available to help him during the case.
And, incidentally, on that holiday I took part in a ski race with Swiss Members of Parliament and had the good fortunate to uphold the name of this House in what was a most enjoyable interparliamentary competition. I flew to London and back from Switzerland, breaking my holiday, because I was asked to do so. Was counsel wrong, knowing these facts, to have asked me to return specially? And, if not wrong, why is access and help during the case any different from access and help in the earlier stages while the case is in preparation?
Fourthly, while I was sitting next to the Treasury Solicitor, immediately in front of counsel, in the court for five days at counsel's request, listening to the case, it became apparent that I could have been even more helpful if, at that earlier time, when I wanted it, Treasury counsel and I could have discussed what evidence was available and might be helpful. I did not meet counsel until after it had become impossible to submit any further evidence. Why did the Attorney-General make this difficulty about my finding out from counsel what help I might be able best to offer?
Why did he wish to stop me short at a telephone conversation with counsel— conversations instituted really by his predecessor—and conversations with the Treasury Solicitor, and an affidavit which was clearly less complete and valuable

than it might have been, and should have been? Is not direct access to counsel— and this is what I want to ask the Attorney-General—the only way of giving the best help to the court? Does not the Bar wish for direct access? Does it not deplore all impediments placed between them and those able to help?
Fifthly, I am advised that it is quite "usual" for counsel to discuss evidence with experts who are not parties to the case, and that the trustees who employ such counsel do usually allow uninhibited access. What is the Attorney-General's evidence that it is not usual? Can he, indeed, prove that it is unusual? Surely he must know of very many instances to the contrary. Is he saying that the permission given by his predecessor was "unusual"? Is it not rather that it disposes completely of his contention?
Sixthly, the symbolisation of language and the considerations of the design of an alphabet are highly technical. The Professor in English Language at Edinburgh University—and who can be better authority on the English language than a Scottish professor—Professor Angus McIntosh, considers this case as "technical as one, say, about protons or non-filterable viruses"—to use his words, but with the added complication that whereas virtually nobody is an authority on non-filterable viruses, everybody thinks he is expert about linguistics through vision, and thinks he needs no expert help. Therefore, why does my right hon. and learned Friend wish to deny to counsel, and so to the court, the fullest and freest access to expert knowledge which, as the professor says, is so very rare?
Seventhly, and finally, Shaw wrote asking me to do all I could. Nobody doubts that Shaw wanted his will to succeed. The Attorney-General was responsible for making it succeed, if it was legally possible. Why does not this carry any weight with the Attorney-General?
These are seven questions that really all come down to one: what would have been the harm? Why gratuitously obstruct help being offered to the court?
It is not only that my right hon. and learned Friend obstructed in April, 1956, and that he failed in March, 1957, to


permit it. He would not dissent, I am sure, from the view that he has not, since March, or at any time, changed his mind. I have not, despite all efforts, succeeded in meeting his counsel since my approach on 4th March. Will he not now withdraw his obstruction and allow me to confer with his distinguished counsel who will, I hope and suppose, be advising him about an appeal?
The Attorney-General has been very busy with the very long Adams case and with other considerations. Perhaps he is less busy now and more able to see the wisdom of facilitating and not obstructing those offering help. If so, I will be delighted, if I may, to have access to counsel, if a still willing counsel; to see him with anyone that the Attorney-General cares to name; with or without my solicitor or anybody else. All along the only issue has been that I wish to help and to be given the opportunity of doing so to the best of my ability.
He may say that to allow me to do so now would be "irregular" as well as unusual. He said so publicly on 5th March. Further, he may say that, because in the Court of Appeal the argument will be only on law and because no fresh evidence may be introduced at this stage there is no help that I might now give counsel. None of those arguments will hold water—for two reasons. One is that in the court of first instance the argument was only on law, with no fresh evidence to be introduced—they do that in Chancery, apparently, yet I was even then apparently helpful—and, indeed, the fact that I was brought so late into contact with counsel was the cause of my being less helpful than I might have been. I can, presumably, be no less helpful with technical knowledge in the Court of Appeal than I was considered to be in the lower court.
Further, a learned Queen's Counsel whom I have consulted in default of permission to confer with Treasury counsel has, in his learned opinion to me, said that expert knowledge such as I may have would be an essential complement to the legal argument in the Court of Appeal.
Why in 1956, why in March, 1957, and still continuing until now, is there this obduracy? Why does my right hon. and learned Friend court the suggestion that

justice has been impeded and fettered? Why will he not see that in his high office it is most desirable that justice should also be seen to have been done? Is he not aware of the dangers that he is creating for himself by excluding thus the one person, other than the trustee, whom Shaw had called upon? This is a case of world wide interest, and there are many in other nations who are anxious that British justice should be done and should be seen to have been done.
Moreover, does not my right hon. and learned Friend see the further dangers into which, by his past record, he is leading his high office? Twice he came to the House to oppose alphabet reform, once when he was Solicitor-General— perfectly proper in itself: he is entitled to his private views, but he has labelled himself publicly as one of those holding privately strong views against what is the essence of the litigation about Shaw's will, a project which, moreover, arouses violent partisanship.
My right hon and learned Friend ought, in any case, to be leaning over backwards in such a case of world interest and unusual character to show that he will take all the help which is offered. He would be doubly wise to do so seeing that in his private views he is so deeply implicated in opposition to what is at stake.
Nothing will give me greater pleasure than to learn that my right hon. and learned Friend will tonight finally allay all anxieties on both the above scores, and that he will facilitate access to counsel for me and for anyone else who appears to have the possibility of helping counsel. If so, he will worthily have upheld his most honourable office.

10.37 p.m.

The Attorney-General (Sir Reginald Manningham-Buller): This is a rather extraordinary subject to raise in a debate on the Adjournment. It does not arise out of anything which has happened in this House, but only through the very keen interest that my hon. Friend the Member for Bath (Mr. Pitman) has taken in the litigation in relation to Mr. Shaw's will.
My hon. Friend has sought to represent that I have endeavoured to obstruct his seeing counsel who were appearing on my


behalf before the case came on. He spoke to me about it as long ago as in April,
1956, and to get the record straight I would just very quickly read to the House what I said in reply to him:
Thank you for your letter. I am grateful to you for having spoken to me about this. I think I should make it clear that in view of the large amount of money involved the case is being brought before the Court for the Court's decision as to the validity of certain of the bequests. Counsel appearing for me will put before the Court such evidence and authorities as may be relied on in support of the bequests, and I understand that you have sworn on affidavit in the matter. I am sorry to disappoint you, but I think that it is desirable that there should be no departure from the ordinary rules in this case. It would be unusual for someone who is not a party to the action to have direct access to counsel. If there is anything you wish to add to what you have already said, if, for instance, you think that the affidavit you have sworn should be varied or amplified, by all means inform Mr. Burke, of the Treasury Solicitor's Department. He will take all necessary steps.
I had no reply to the letter. I had no complaint from my hon. Friend in regard to it. It was open to him to see counsel if counsel thought he could really give any help in the presence of the Treasury Solicitor. All I insisted upon was that a representative of the Treasury Solicitor should be present when he saw counsel appearing for me, if it was thought he could be of some assistance. All I insisted upon was the usual practice being followed. I cannot think that there is any substance at all in the complaint that my hon. Friend has made about its not being possible for him to give all the assistance he desired to give before the trial of the case before Mr. Justice Harman.
I understand that my hon. Friend saw counsel appearing for me on a number of occasions in the usual way—that is, at conferences attended by representatives of the Treasury Solicitor's Department. He swore an affidavit, which was used in evidence at the trial, and I was certainly under the impression that counsel saw him whenever there was any occasion for him to do so. I am really not quite sure what is his complaint now, made in May, 1957, with regard to this. He was not a party to the case, but one who gave evidence by affidavit, and he was seen by counsel appearing for me as frequently as was required.
Judgment was given on 20th February, 1957, Mr. Justice Harman holding that what I may call the Alphabet Trusts were invalid. The next I heard about the part that my hon. Friend was seeking to play in this matter was on an occasion when he spoke to me in a Division Lobby as we were going through the Lobby and without giving me any indication that it was anything more than a casual conversation. He has apologised for making that conversation the subject of a Press release, and I must put it on record that I cannot accept as accurate his version of that conversation.
I knew nothing at that time about the efforts that my hon. Friend had made to have a conference, with his own solicitor, with counsel who had been acting for me. Before this conversation took place in the Division Lobby, and without telling me, my hon. Friend had apparently sought to arrange a consultation with leading counsel who appeared for me before Mr. Justice Harman with a view to considering with that leading counsel whether I should appeal from Mr. Justice Harman's judgment. It is really a very astonishing proceeding.

Mr. Pitman: No.

The Attorney-General: It was indeed. I have information from Mr. Milner Holland about this.
My hon. Friend takes, I know, a great interest in this case, but that the witness who gave evidence in the case should, behind the back of a party to the case, seek to arrange a conference with that party's counsel was, to say the least, remarkable.

Mr. Pitman: I am reluctant to intervene—

The Attorney-General: I did not know anything of the sort had happened until after my conversation with my hon. Friend in the Division Lobby. I had no idea of it. Leading counsel, quite naturally and very properly, when my hon. Friend's approach was made to him, said that he could not have such a consultation without my consent.
My hon. Friend has complained that there was no reply obtainable from me between 25th February and 5th March. I had no knowledge of any such request


until after his conversation with me in the Division Lobby, which was after the arrangement apparently had been made, or was sought to be made, for this particular consultation. It is quite wrong to suggest that I at that time stopped any consultation taking place. I did not know anything about these arrangements. I had no knowledge of them at all or of these efforts to make them.
I am quite certain of this. If my hon. Friend were a party to a case, he would think it quite remarkable if one of the witnesses in that case had, without a word to him, tried to secure a consultation with his counsel to discuss with that counsel whether he should bring an appeal.
I cannot really say that my hon. Friend has performed a public service in raising this matter tonight, but perhaps some advantage may be reaped from this debate if I explain to him what I have endeavoured to explain before, but without any success—what really is my duty in relation to this case in my official capacity.
The relevant facts for the purpose of this debate can be quickly summarised. George Bernard Shaw left his estate to the Public Trustee on trust to carry out certain work of research on what I shall call a Shavian alphabet, with the proviso that if that trust failed the money was to go at once to three residual legatees, all of whom—I must emphasise this, for it is important to the exercise of my functions—are charitable institutions.
My concern in the case arises from the fact that I am at law the only representative of the Crown in its capacity as protector of charities. It is not my concern to support any particular charity. It is certainly not my concern, nor my duty, to support the provisions of any particular will. I fear that, despite my many efforts to explain the point to my hon. Friend, he has failed to grasp this, because he seeks to assert that it is my duty to support Mr. Bernard Shaw's will. My concern in this case was, therefore, to support the trust for the Shavian alphabet if, and only if, I was satisfied that it was a valid charitable trust. If I had been satisfied of its validity, but not that it was a charity, not only would I not have been concerned to support the will, I should not even have been a party

to the proceedings which were before the court.
It is equally not my concern to support the will because of any view I may have formed of the intentions of Mr. Bernard Shaw in drawing his will in the particular language he selected. That is not my function in my official capacity in this matter. The question of my personal views to which my hon. Friend referred has no bearing whatsoever on my discharge of my official duties. The question whether I voted for or against Bills designed to introduce simplified spelling has nothing whatever to do with it.
I will now return to the part played by my hon. Friend in the case. He gave evidence in an affidavit in support of the argument that the trust was a charitable trust, and I am grateful to him for the information and help that he gave with regard to that. But now, judgment having been given, he reiterates his demand to see the counsel who represented me. An appeal, however, in the circumstances of this case lies, as I have told my hon. Friend more than once, on points of law only.
No useful purpose can be served by my hon. Friend at this stage seeing counsel appointed by me. There is no question of his giving any evidence in the Court of Appeal, and I see no reason whatsoever for acceding to my hon. Friend's request. He is, of course, at liberty to consult, as I understand he has done, any other counsel he wishes, but the only ground for my consulting other counsel would be lack of confidence in the experienced counsel who have appeared for me, and I certainly do not lack that confidence. The implied suggestion that they are incompetent to deal with the question is wholly unwarranted.
I want to make it quite clear that my hon. Friend is quite wrong in regarding it as my function to put the case for Shaw's side. That is not my duty. The only reason I appear is as protector of charities and, as I have indicated, I should appeal—I may appeal—if I consider that there is ground for doing so in that capacity alone.
There has been some reference to funds for an appeal. If I come to the conclusion that an appeal ought to be brought in this case—and I can assure


my hon. Friend that not even the worst of his efforts will discourage me from bringing an appeal if I decide that that is the right course of action—it will be brought without recourse to any funds that might be subscribed.

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order

Adjourned at eleven minutes to Eleven o'clock.